The Kenya Shilling was exchanging at a Mean Rate of 109.1971 when the forex markets opened for trading today, with the Central Bank of Kenya quoting the local unit at KSh 109.0971 and selling at KSh 109.2971 against the greenback.
The last time the Kenya Shilling breached the 109 level was in March this year, touching a low of 109.6400 mean rate against the US$ on 8th March 2021.
Financial analysts who spoke to Kenyan Wallstreet said the Kenya Shilling could be facing pressure from global crude oil prices, which are pointing to a steep rise in the coming months, adding a spike in demand for dollars by Kenyan oil importers.
There is also speculation that many are converting their Kenya Shillings into US Dollars to hedge against perceived inflation in the coming months.
Kenya Shilling facing rising inflation expectations
A notice by the Kenya Revenue Authority that it intends to adjust the duty on several excise goods to take care of inflation come October this year, subject to approval from the Treasury Cabinet Secretary.
The intention has already triggered high inflation expectations in the economy.
The local unit, which has been on a steady decline against the US dollar for several weeks now, hit a mean of 109.1353 yesterday, 109.0176 on Wednesday. The Kenya Shilling opened this week at 108.7688 to the US dollar and has yet to recover.
Traders attribute this weakening to increased dollar demand from the manufacturing sector, which has outstripped supply from tea and horticulture exporters.
Importers are said to have strengthened their dollar positions in the light of increasing new COVID-19 infections cases reported in Kenya.
On Thursday, 12th August 2021, Kenya’s Ministry of Health reported 1,546 confirmed COVID-19 cases from a sample size of 9,752 tested, giving a positivity rate of 15.9%.
This is compared to a positivity rate of 14.7% on Wednesday and 14.5% on Tuesday this week.
Horticulture exports earnings dipped by KSh6.3 Billion in Q2 2021 to KSh77.1 Billion from KSh83.4 Billion in Q2, 2020, putting pressure on forex earnings that usually are used to shield the Kenya Shilling from such vulnerabilities.
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