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Wednesday, 11 January 2012

The Kenyan Shilling Loses Slightly Against the Dollar

After recording impressive gains to the 83 level (during the third week of December last year), the Kenyan Shilling has lost ground slightly against the dollar and it is now trading at the 87 level (at the time of writing this article).

The slight side of the local unit is largely attributed to the rising demand for the United States dollar. The high demand for the greenback has been caused by increased importation of raw materials by companies who have just come back to the market after the holiday season. Specifically, the increased demand from the corporate and oil sectors have weighed down the Kenyan Shilling to its current trade level.

As mentioned in earlier articles, the Central Bank of Kenya had been trying to tame the volatility of the Shilling through enactment of some stringent policies. These initiatives bore fruit and the Shilling strengthened considerably against the dollar. However, these initiatives were only short-term and punitive to the economy of the country. As a result, in recent days, the local currency has been ceding more ground. The supply of the dollar has not been equivalent to its demand in the market; therefore, this has led to the slight fall of the local unit.

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Will the weakening of the Kenyan Shilling continue? In the current market conditions (the high demand for the dollar), the Shilling is expected to cede more ground to the dollar. Thus, investors will be looking closely at the 90 trade level in the coming weeks.

Will it reach that level? Well, let’s wait and see…..

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