Treasury Secretary Rotich sees stability in FX market

National Treasury Cabinet Secretary Henry Rotich reads the 2015/2016 Budget in Parliament on June 11, 2015. Mr Rotich sees the shilling attaining stability in the short term aided by the hike in the Central Bank rate. PHOTO | BILLY MUTAI |  NATION MEDIA GROUP

In Summary

• Today, the shilling has maintained relative stability, trading within Monday’s range against the dollar despite concerns that Greece’s impending default on its debt would cause the local currency to weaken.
• This, coupled with end month demand for dollars from importers, weakening exports against surging imports, would put the shilling under immense pressure.

By JOSHUA MASINDE
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National Treasury cabinet secretary, Henry Rotich sees the shilling attaining stability in the short term aided by the hike in the Central Bank rate.

Speaking to Nation Tuesday, Mr Rotich said policy measure such as raising the CBR will attract more dollars into the country as foreign investors seek higher returns in the local debt market, boosting the shilling.

“The measures that have been put in place should restore stability. The raising of the CBR should attract more capital flows into the country and stabilise the shilling. Infrastructure spending using foreign sources of financing should also help. Going forward, we should have more stability because demand pressure will ease,” Mr Rotich said today.

Today, the shilling has maintained relative stability, trading within Monday’s range against the dollar despite concerns that Greece’s impending default on its debt would cause the local currency to weaken.

The shilling opened trading today at 98.65/98.75 to the dollar and closed at 99.20/30 to the dollar.

END MONTH DEMAND

This, coupled with end month demand for dollars from importers, weakening exports against surging imports, would put the shilling under immense pressure.

Most currencies across Africa and in emerging economies have also been hit by the appreciation of the dollar in the international currency markets. By comparison, the shilling has not weakened substantially, according to Rotich.

“By and large, our exchange rate has not weakened substantially. The actions that we are doing both on the fiscal and monetary side should ensure stability. We are doing this at a time when we are undertaking huge infrastructure investment in constructing the standard gauge rail as well as in the road and energy sectors. Going forward, this pressure should ease,” the CS said.

This year, the shilling has weakened by about 8 per cent to the dollar and it nearly touched the 100-mark to the greenback, prompting the Central Bank to raise its policy rate by 1.5 percentage point to 10 per cent to provide support. Forex analysts, however, expect the shilling to come under pressure in coming days.