Kenya: Shilling falls to all time low on rise in dollar demand

The shilling on Wednesday has slumped to an all-time low exchanging at 111.7 units against the dollar on increased dollar demands by importers and corporates.

Reduced dollar inflows from key exports such as tea and horticulture combined with high demand for hard currencies for machinery, oil and capital equipment imports have continuously piled pressure on the local currency in the fourth quarter.

Ken Minjire, a senior associate for debt and equity at AIB-AXYS, in an interview said “Supply for the dollar has been low but demand from corporates paying dividends and in need for dollars for other transactions has been high as a result the shilling has struggled.”

The local currency, which has been on a consistent decline since the month started, has now seen its value shed by five percent since May when it had risen at 106.5.

Forex reserves which play a key role in stabilizing the shilling and paying off external debt have been eroded by Sh41.2 billion (369 million USD) to Sh1.01 trillion (9.07 billion USD) in a 1-month period.

A weak shilling leads to an increase in the cost of imports as more units of the local currency are now needed to exchange for the hard currencies which are used in the international markets.