Jan. 22 (Bloomberg) -- Kenya’s shilling depreciated for a third day, heading for the weakest in more than a year as businesses accumulated dollars before elections in March.
The currency of East Africa’s biggest economy fell as much as 0.5 percent to 87.45 a dollar by 3:36 p.m., the lowest on a closing basis since Jan. 4, 2012, according to data compiled by Bloomberg. The shilling has dropped 1.6 percent this year, compared with a 1.5 percent decline in Tanzania’s shilling and 4.5 percent for South Africa’s rand, the continent’s worst performer.
“The shilling is under pressure from businesses which have started hedging their dollar positions ahead of the general elections in March,” Bernard Matimu, chief dealer at NIC Bank, said by phone. “Elections bring uncertainty in the market and from previous elections, businesses prefer to accumulate dollars in advance.” He expects the shilling to weaken to 88 a dollar by the end of March.
The vote will be the first since a disputed 2007 poll sparked two months of violence in which more than 1,100 people died. The shilling will probably weaken before the ballot and end the year at 88 a dollar provided the elections pass without violence, Morgan Stanley said in a Jan. 14 note.
The shilling’s retreat today will be the biggest one-day decline since July 31 if it closes at 87.45.
“There is some flight to safety because of uncertainty ahead of the elections,” Vimal Parmar, head of research at Burbidge Capital Ltd, said by phone from Nairobi.
The Ugandan shilling weakened 1.1 percent to 2,703.95 a dollar, while Tanzania’s shilling depreciated less than 0.1 percent to 1,608.50 per dollar.
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