Banks resume selling dollar at Sh140 despite CBK intervention

American dollar symbol standing on wood surface in front of a graph. [Getty Images]

Retail dollar buyers have started paying again up to Sh140 per unit in banking halls as the demand for the greenback surges. 

This comes amid the revamping of the interbank foreign exchange market, which was seen as the panacea for easing access to foreign currencies. 

Access to the greenback previously proved difficult due to banks' unwillingness to sell to each other, making it hard for smaller players to fulfil their orders from clients.  

According to Central Bank of Kenya (CBK) data, the shilling exchanged at an average of 133.9529 against the dollar yesterday.  

But retail dollar buyers paid up to Sh140 per unit in banking halls. 

This is likely to see the margin between the US dollar’s printed rate by CBK and the market rate for customers quoted by banks and foreign exchange bureaus continue to widen again. 

Several large banks are now selling the dollar at between Sh137 and Sh140 per unit, while buying the same at between Sh127 and Sh133, with bankers and forex bureaus saying the higher prices are driven by fresh demand and the cost of accessing the hard currency on their part.  

Standard Chartered Bank Kenya and Equity Bank quoted the greenback at Sh139 and Sh140.5 per unit respectively yesterday while buying the same at Sh127 and Sh128.5 respectively, according to a spot check by The Standard.  

The volatility in the forex market had previously slowed dollar trading among lenders, causing a scarcity of the US unit.  

The scramble for the dollar means that buyers — both for trading and hedging purposes — keep bidding higher for the currency.  

This comes at a time Kenya is banking on an oil import deal that will cut demand for dollars to ease the current shortage. 

President William Ruto said Tuesday he expected the local unit to strengthen to below 120 per dollar "in the next couple of months," in the wake of the deal that will see Kenya buy oil on credit of up to one year from the United Arab Emirates (UAE). 

The Energy regulator is today expected to outline the monthly breakdown of fuel prices. 

Fuel marketers said earlier they spend an average of $24 million (Sh3.2 billion) daily to buy and stock fuel for various outlets across the country. 

Kenya signed an oil import deal with companies in the UAE and Saudi Arabia last month, putting in place a longer credit period and altering the structure of the deal to stagger demand for dollars in the market. 

Fuel marketers earlier complained of the inability to secure sufficient US dollars to pay for fuel and gain access to their stocks at the Kenya Pipeline Company (KPC) depots, leading to fuel shortages in some Petrol stations across the country previously. 

The banking industry regulator, CBK, earlier dismissed the possibility of a parallel exchange rate developing in the country, saying the market has enough dollars to meet demand from importers and corporates. 

CBK Governor Dr Patrick Njoroge reiterated this position earlier this week on the sidelines of the ongoing International Monetary Fund (IMF) and World Bank Spring Meetings in Washington. 

"Reserves have been lower than what we expected, but is this level adequate? The answer is yes," the governor told Reuters in an interview, highlighting the foreign external reserves, which stood at $6.4 billion as of April 5, according to the central bank's latest data.

This is enough to cover 3.6 months of imports. "We are not very worried because we have significant inflows coming in," Dr Njoroge told the global news agency. 

He said Kenya is also seeking a new loan under the Fund's Resilience and Sustainability Trust (RST) to help countries ensure sustainable growth. 

"We have already started the work," added the governor, without disclosing the loan's potential size. 

Investors are known to hoard dollars for speculation purposes in the wake of forecasts showing that the shilling would remain weak against the US currency.