NAIROBI: Kenya’s shilling slipped in early trading on Wednesday, weighed down by demand for dollars from some banks and oil firms.
By 0721 GMT, the shilling was trading at 97.55/65, compared with Tuesday’s official close of 97.25/45.
“The trend is it will weaken but slowly,” said John Njenga, a dealer at Commercial Bank of Africa, referring to the shilling.
He noted there was demand for dollars from energy firms at the start of trading, prompting banks to seek dollars to meet orders. Another trader also cited dollar demand in interbank trading.
Traders said the currency was likely to slide further in the next few sessions, moving towards the 98 or 98.50 level, which would send it back to three-and-a-half year lows.
But they said the slide was likely to be slow as companies meet a tax payment deadline this week, which means they would be seeking shillings and offer some support to the currency.
The shilling has been under pressure this year due to the global strength of the dollar and a slide in foreign exchange earnings from tourism after a spate of militant attacks.
Traders said the bigger deficit in the 2015/2016 budget outlined last week was also adding pressure by fuelling inflation. The central bank raised interest rates last week, but the hike has done little to halt the shilling’s fall.
“Inflationary pressures would suggest we should see interest rates move up in coming months, but it would be very hard to balance that with the growth agenda of the government,” one trader said.
