Kenyan Shilling approaches 4-year lows on excess liquidity
News
By
Reuters
| Sep 04, 2015
Kenya’s shilling slid against the dollar again, weakening to a new four-year low due to abundant local currency liquidity in the market. Stocks were up. At the close of trade Thursday, commercial banks quoted the shilling at Sh104.95/Sh105.15 to the dollar, compared to Wednesday’s close of Sh104.65/75.
The shilling has been edging closer to its all-time low of about Sh107 to the dollar, set in October 2011.
“Over the last couple of months on average, the shilling has lost about a shilling every week and the trend looks set to continue,” said a trader at one Nairobi-based commercial bank. A trader said there was high liquidity in the market after the Government released payments to State-linked entities and ministries, putting pressure on the local currency.
“The liquidity, coupled with heightened demand (for dollars) that has been there, has seen the shilling go to four-year lows and the trend looks set to continue,” he said.
The shilling has received some support from Central Bank, which has in the past few months periodically intervened in the market to prop up the currency by selling dollars. This week the bank has also regularly drained excess liquidity from the market. The shilling has been under pressure from the dollar’s strength, Kenya’s high current account deficit and poor tourism inflows after a spate of attacks by Somalia al Shabaab insurgents.
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The NSE 20 share index rose 26.23 points to close at 4153.31, lifted in part by Safaricom gaining four per cent to close at Sh41.50 per share.
On the secondary market, government bonds valued at Sh232 million were traded, down from the Sh2.3 billion worth of bonds traded a day ago.