Guest Opinion By Paul Theuri
The Kenya shilling is likely to come under pressure following a decision by United States Federal Reserve to raise its base interest rate to 1.00 per cent form 0.5 percent.
The move is likely to strengthen the dollar globally which coupled with a shift in capital back to the US would be place emerging markets currencies under pressure.
Knock on effect will affect sovereign debt such as the Kenyan Eurobond if investors start demand a premium to lend to emerging economies. A weaker shilling would also result in higher cost of repayment for Kenya’s dollar denominated loans.
However, Kenya’s Central bank is expected to cushion the shilling against such pressure which would lead a reduction in the country’s foreign exchange reserves.
A weaker shilling also raises the cost of living for Kenyans given that the country is a net importer of goods, however it offers benefit to exporter thogh it’s short-lived.
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Note; The author’s article does not necessarily represent Kenyan Wall Street’s views.
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