Kenya’s shilling retreated toward the lowest in more than six months on investors’ “panic buying” of dollars in anticipation of the currency declining further.
The currency of East Africa’s largest economy depreciated 0.4 percent to 85.75 a dollar, and was trading 0.2 percent weaker at 85.60 a dollar, the lowest level on a closing basis since June 5, by 3:51 p.m. in Nairobi, the capital.
“There is increased demand for dollars driven by panic buying on expectation that it will weaken in the coming days as businesses look to increase their imports,” Julius Kiriinya, a trader at Nairobi-based African Banking Corp., said by phone.
Kenya’s economy expanded 3.3 percent in the second quarter, the slowest pace since the final three months of 2009, as tea and flower exports slumped and tourism declined, eroding foreign-exchange income from the country’s two biggest sources.
The shilling is expected to weaken to a range of 88 to 90 per dollar by year-end as the balance of trade worsens, Nairobi-based Sterling Capital Ltd. said in a note on Oct 19.
“We are seeing demand for dollars coming in from a cross-section of businesses seeking to accumulate dollars on expectation” the shilling may weaken, Duncan Kinuthia, chief dealer at Nairobi-based Commercial Bank of Africa Ltd., said by phone today.
The Central Bank of Kenya accepted 7 billion shillings ($82 million) of seven-day repurchase agreements and 10.7 billion shillings of 14-day term-auction deposits, an official who declined to be identified in line with policy, said by phone.
Uganda’s shilling weakened 0.3 percent to 2,607.5 a dollar, while the Tanzanian shilling retreated 0.2 percent to 1,597 a dollar.