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Kenya central bank sells dollars after shilling slides to near-record low

BUSINESS
By Reuters | March 22nd 2020

The Kenyan shilling dropped to a new four and a half year low on Friday due to persistent worries about the impact of the coronavirus outbreak on export earnings.

This prompted the central bank to sell dollars to limit the losses, traders said.

At the 1330 GMT close of the market, commercial banks quoted the shilling at 106.10/30 to the dollar, down from 105.50/70 at Thursday’s close and at a new low since September 2015. “They came in the market to try and control this slide,” said a senior trader at one commercial bank.

The shilling touched an intra-day low of 106.50/70 earlier on Friday, a touch shy of its record low of 106.60/70 hit on October 12, 2011, according to Refinitiv data.

“There is a lack of inflows, everybody is holding back onto their dollars,” a second senior currency trader from a commercial bank said.

The currency of East Africa’s biggest economy tumbled to a four and a half year low in Thursday’s session as turmoil in global financial markets spilled over into frontier economies.

The lockdowns in Europe, which is Kenya’s biggest export markets for produce like flowers and a top source of tourists, are expected to curb its hard currency earnings temporarily.

Last Friday, Kenya confirmed its first case of the coronavirus, causing the shilling to weaken. The cases have since jumped to seven.

The government has closed down schools indefinitely, restricted large public gatherings and limited entry into Kenya for people from countries with high cases of the virus.

The central bank is due to hold its rate-setting meeting on Monday.

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