Tuesday, Jul 14, 2020
International Finance
Forex

Kenyan shilling drops to 5-year low as import demand rises

Last week, the currency dropped to 104.05/20 to the dollar, marking its lowest level in nearly two years

The Kenyan shilling saw a drop against the dollar to a 5-year low this week owing to import demand coupled with excess liquidity in  money markets, media reports said. Commercial banks said that the shilling was at  104.25/35 per dollar, compared with 104.05/15 at Monday’s close. 

A senior trader from a commercial bank told Reuters, “The reason for the Kenyan shilling drop  is liquidity-driven, though we are now at the end of the month and increased end month dollar demand could also come into play.” Last week, the shilling value fell to 104.05/20 to the dollar.  The shilling’s drop marked the currency falling to its lowest value in nearly two years.

The shilling’s drop in value was associated with uncertainty on the basis that the country’s finance minister would be charged with financial misconduct. Since the announcement, the shilling lost 0.8 percent. 

Bloomberg reported that the number of visitors to the country declined to 921,090 in the first six months of the year. This is in comparison with with 927, 977 during the same period last year. 

Tea production in the country during the first five months of the year dropped to 170.18 million kilograms compared with 187.69 million kilograms during the same period last year. It appears that the country’s trade gap has been increasing as a result of muted exports and growing imports. 

“If three of the top four forex earners are having a downturn it will exacerbate the deficit,” Churchill Ogutu, a senior research analyst at Genghis Capital told Bloomberg. 

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