The Kenya Shilling has continued on its downward spiral against the US dollar to hit an all-time low of KSh 110 when the forex markets opened this morning.
The depreciation puts pressure on importers who will have to use more Shillings to bring in commodities such as fuel, gas and other items.
When trading in forex opened today, the Central Bank of Kenya(CBK) today quoted the Shilling at a mean rate of KSh 109.260, buying at KSh 109.1600 and 109.3600 selling. The shilling has traded in the range of 100.2900 to 110.0000 over the last 52 weeks according to data from Bloomberg.
“The Kenya Shilling continued depreciation against the US dollar is a reflection of investors’ worries about the negative economic impact of the new surge of the Coronavirus infections and related deaths. It could also be due to a rapid deterioration of the country’s political environment in both short and long terms, related to BBI politics,” says Professor Gerrishon Ikiara, a renowned economist.
Attention shifts to the next Monetary Policy Committee (MPC) meeting, to be held on Thursday, November 26th, 2020, with traders, importers and currency dealers keen watching the ammunition Central Bank of Kenya( CBK) will deploy to shield the Shilling.
Financial Analysts have dismissed attempts by the CBK to use the policy rate to steady the Shilling, adding that the tool has been ignored by banks when pricing loans and has little impact on the interbank market.
“The CBR doesn’t seem to affect the actions of banks in terms of increasing or reducing liquidity in the market,” said Reginald Kadzutu, Head of Retail, Zamara.
The November meeting will be two months after the last MPC gathering held on 29th September 2020, at which the CBK retained the Central Bank Rate (CBR) at 7%.
The CBK Governor Dr Patrick Njoroge has in the past blamed speculative currency dealers regarding movements of the Shilling.
The Governor insists that its mandate of overall price stability that has a floating exchange rate regime.
CBK says were it to intervene in an attempt to hold the exchange rate at a particular level or move it towards a specific direction, its holdings of reserves would not last for long.