Kenya’s shilling dropped the most in seven weeks against the dollar as tea prices retreated to the lowest in at least a year, cutting earnings from the East African nation’s largest foreign exchange.
The currency of the world’s biggest exporter of black tea weakened 0.2 percent, the most on a closing basis since April 22, to 87.80 per dollar by 4:42 p.m. in the capital, Nairobi. The shilling has lost 1.7 percent in 2014.
President Uhuru Kenyatta proposed a stabilization fund today to cushion the tea industry, a day after the price for African tea slipped 2.1 percent to $1.86 per kilogram (2.2 pounds) at an auction in the port city of Mombasa, the lowest since at least June last year, according to data compiled by Bloomberg. The country also relies on tourism to bring in the greenback, and arrivals have dipped amid warnings by some foreign governments to avoid travel to the Indian ocean coast.
“There’s an increase in demand for dollars and the inflows continue to deteriorate because of a nosedive in tea prices and tourist arrivals have reduced,” Bernard Omenda, head of treasury at Nairobi-based Equatorial Commercial Bank Ltd., said by phone.
Moves by the Central Bank of Kenya to take excess shillings off the market through sales of repurchase agreements didn’t stem the currency’s slide today. The institution sold 5 billion shillings ($57 million) of seven-day repos, according to its page on Bloomberg.