Kenyan shilling continues slide, stocks down

Kenya’s shilling weakened further against the dollar Wednesday, as it came under increasing pressure due to inflated demand from companies looking to buy dollars at current rates out of fear the local currency would weaken further.

At the close of trade Wednesday, commercial banks quoted the shilling at Sh104.65/75 to the dollar, compared to Tuesday’s close of Sh104.25/35 to the dollar.

“We see people afraid it will weaken and it becomes a self-fulfilling prophecy,” said a trader at a Nairobi-based commercial bank.

“When you start hitting new levels, you start seeing panicky buyers and you have abnormal demand building up.” The trader said the shilling could weaken to the Sh105 level now that it has convincingly breached the psychologically important Sh104.50 line.

The shilling, down 15 per cent against the dollar this year, has been under pressure from the dollar’s strength, Kenya’s high current account deficit and poor tourism inflows after attacks by Somalia’s al Shabaab insurgents.

Kenya’s central bank has in the past few months periodically intervened in the market to support the currency by selling dollars. It also regularly mops up excess liquidity.

Wednesday, the bank said it planned to mop up Sh13 billion ($125 million) in excess liquidity from the money markets, which would make it costly to hold dollars and in turn give the shilling support.

The NSE 20 share index closed down 26.13 points to close at 4127.08. Nation Media Group was down Sh2 per share to close at Sh163 , while East African Breweries closed Sh1 down at Sh274 shillings per share.

On the secondary market, government bonds valued at Sh2.3 billion ($22.07 million) were traded, up from the Sh2.9 billion worth of bonds traded on Monday.