Tanzania’s shilling dropped to a record low to lead declines among currencies in East Africa’s biggest economies this week as investors sought dollars amid a rally in the foreign currency.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, extended its first weekly gain since the period ending April 10. A report on May 19 showed U.S. housing starts jumped to a seven-year high, while data on Friday showed that consumer prices rose the most in two years, boosting speculation the Federal Reserve may be able to increase interest rates soon. Shillings in Kenya, Uganda, and Tanzania joined 16 African currencies slumping against the dollar.
“There has been a lot of demand for dollars locally,” Martin Runo, assistant manager of foreign exchange at Nairobi-based Chase Bank (Kenya) Ltd., said by phone Friday. “Globally the dollar strengthened against the euro because of positive data in the U.S.”
Tanzanian gold exports are down, Kenya tea production declined even as prices rose, and estimates for Uganda’s coffee crop were lowered, showing key sources of foreign exchange are drying up. The lack of inflows from abroad comes as companies seek dollars to pay for imports and infrastructure being built in a region where growth is forecast at 6.6 percent in 2015 and 6.8 percent in 2016, according to the International Monetary Fund.
Tanzania’s currency fell 1.3 percent to 2,052 per dollar by 5:28 p.m. in Dar es Salaam, an all-time low on a closing basis. That extended its weekly depreciation to 1.9 percent. In Nairobi, Kenya’s shilling was unchanged at 96.80 for a five-day decline of 0.9 percent and its sixth weekly decrease. Uganda’s shilling was unchanged for a fourth day for a drop of 0.1 percent since May 15.
“There have not been proper flows coming into the market during the first quarter of this year,” Alex Ngusaru, head of treasury at CRDB Bank Plc, said by phone from the Tanzanian commercial capital, Dar es Salaam. Inflows may pick up as agriculture exports increase and the tourism season starts in the current quarter, he said.
The Rwandan franc fell 0.2 percent to 690.50 per dollar, paring its weekly advance to less than 0.1 percent. Burundi’s currency is unchanged for the week at 1,597.68, after dropping the previous two weeks following violent protests amid President Pierre Nkurunziza’s bid to extend his rule to 15 years. Kenya has the biggest economy in the East African Community, followed by Tanzania, Uganda, Rwanda and Burundi.