The Kenya Shilling has been a steady losing streak the entire week in what analysts and forex traders attribute to strong dollar demand especially from oil importers and weak inflows.
Figures from the Central Bank of Kenya (CBK) shows that when trading at the forex markets opened this Friday, 5th November 2021, the Kenya Shilling was quoted at a mean rate of KSh 111. 55 against the greenback.
Kenya Shilling depreciation against the US Dollar this week
This is compared to a mean of KSh 111.44 on Thursday, KSh 111.36 on Wednesday, KSh 111.29 this Tuesday and KSh 111.24 recorded on the first trading day of this week.
CBK’s Financial Markets department compiles indicative foreign exchange rates daily for use by the general public.
These rates reflect the average buying and selling rates of the major participants in the foreign exchange market at the open of trade every day, thus providing a good indicator for any interested party on the value of the shilling on any particular day.
Analysts cite Kenya’s high external dollar debt and private sector leverage, the country’s anaemic economic growth, a high import bill and subtle dollarization of financial transactions in Kenya, for the lack of faith in the local unit as preservation of value.
Others blame the rising price of crude oil on the international market for pressure on the local unit. Global crude oil prices have been on a steady rise as demand grows in the post-COVID 19 period which has been on the rise due to global economic demand growing.
According to CBK weekly bulletin dated 28th October 2021, the local exchanged at KSh 111.15 per US dollar on October 28, compared to KSh 111.02 per US dollar on October 21.
Analysts say the current action by the Fed on the US dollar does not explain the Kenya Shilling dynamics. They maintain that there is a correlation between the Kenya Shilling Exchange rate and the country’s external debt burden.
Figures from National Treasury and the CBK shows that Kenya’s total debt has been on a rise from KSh 5.8 Trillion in June 2019, KSh 6.7 Trillion in June 2020 and KSh 7.7 Trillion in June 2021.
Kenya’s economy is still import-dependent and thus oscillates around what happens to the US dollar, according to observers. Inflows from tourism, tea, coffee and horticulture exports have been weak to match forex demand.
ALSO READ: Kenya Shilling Weakens further Against US$
