- Kenya’s shilling depreciated, adding to its worst week in almost eight months, as business demand for dollars to settle month-end bills outweighed attempts by the central bank to support the local currency.
The currency of East Africa’s biggest economy retreated as much as 0.3 percent to 87.73 a dollar and traded 0.1 percent down at 87.55 a dollar at the close in Nairobi. The shilling slid 0.7 percent last week, the worst performance since the period ended June 1.
The Central Bank of Kenya has sold dollars for five consecutive days amid concern the shilling will weaken further before elections in March. The currency may slide to 88.56 a dollar over the next five weeks as businesses accumulate dollars before the poll in case it triggers violence, according to the mean estimate in a Bloomberg News survey of eight analysts and traders on Jan. 23.
“The shilling is under pressure on increased demand for dollars as businesses prepare to settle their month-end obligations,” Duncan Kinuthia, the head of trading at Commercial Bank of Africa Ltd., said by phone from Nairobi. The central bank action “has not provided much support to the shilling as there is real demand in the market and it will continue to be on the back foot in the coming days,” he said.
An official in the bank’s foreign-exchange department, who asked not to be identified in line with policy, confirmed the dollar sales when contacted by phone today.
Kenya’s trade gap in November widened as the discovery of the first crude oil deposit boosted demand for imports of machinery and equipment. The deficit reached 83.8 billion shillings ($957.2 million) compared with 81.8 billion shillings in the same month a year earlier and 62.4 billion shillings in October, the Kenya National Bureau of Statistics said in a report on its website.
Foreign-exchange reserves declined to $5.18 billion for the week ended Jan 24, from $5.26 billion previous week, the central bank said on its website on Jan 25.
Tanzania’s shilling rallied 0.1 percent to 1,610 a dollar, while the Ugandan shilling was unchanged at 2,670 a dollar.