CBK’s intervention key to stability of shilling going forward, say traders
Kenyan shilling is expected to be influenced by Central Bank of Kenya’s decision on whether to intervene in the market or not, traders said.
The currency, which was trading at 108.20/40 per dollar yesterday, dropped to its lowest level in July, hit by demand for dollars and a reduction in supply caused by the coronavirus-induced tourism slump.
Through sales of dollars to the banks, the Central Bank has managed to maintain it at around its recent levels but traders said it could weaken if the regulator decides not to intervene again.
“Key determinant is how the Central Bank will react,” said a currency trader with a commercial bank.
The shilling slid to an all-time low of 107.9400 against the US Dollar last month driven by demand for the greenback as importers, including manufacturers and energy marketers placed their orders as businesses sought to return to normal following the lifting of a coronavirus-induced lockdown.
President Uhuru Kenyatta had earlier in the month announced a phased re-opening of the economy and allowed movement in and out of the main cities of Nairobi and Mombasa.
Meanwhile, the Tanzania shilling is expected to hold steady next week as hard currency inflows from the recovering tourism industry and agricultural exports lend support.
“We foresee a stable outlook,” said Terry Karanja, a treasury associate at AZA, a Nairobi-based FX trading firm, adding he expected hard currency inflows from tourism and exports of commodities like cotton and coffee in Tanzania. – Reuters and PD Reporter