The Kenya Shilling has come under tremendous pressure against the greenback, prompting aggressive interventions from Central Bank of Kenya (CBK).
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Analysts expect the local unit to lose more ground against the greenback in the coming weeks.
Traders attribute the Shilling’s relative stability in the past week to an aggressive mop-up activity by the Central Bank to smoothen out the unit’s volatility in the forex market.
“There is pressure on the currency due to a fall in revenue (tourism, exports) and a drastic drop in the growth of remittances. The poor results by listed firms at the NSE will also put pressure on the Shilling as foreigners continue to exit the bourse,” said Reginald Kadzutu-Head of Retail, Zamara.
Analysts share the view that while CBK is active in the forex market, it does not have enough firepower to support the local unit.
Data from Bloomberg indicates that the Kenya Shilling has last depreciated 6.86 percent against the US$ over the last 52-week period.
The Kenya Shilling has been trading at between 107.70 and 108, the lowest level in weeks.
“Expectations are that the Kenya Shilling against the US dollar will trade at the level of 108 and 108.50 in the coming week,” said a Tea Brokers East Africa(TBEA) Limited Market Report, for the week ended 12th August 2020.
With reduced forex inflows and excessive money supply due to cut in the cash reserve ratio as well as the fact that CBK’s forex reserves is funded by debt makes the Kenya Shilling vulnerable to speculators.
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