The Kenyan shilling has come under pressure in the week hitting an all-time low of KSh107.55 against the US dollar.
The shilling opened the week on Monday trading at 107.15 against the dollar and on Thursday some commercial banks quoting the shilling at 107.40 against the dollar.
The downward trend has accelerated in the past one week following President Kenyatta’s easing of movement restrictions that has seen the economy return to normalcy. There is an expectation of a surge in dollar demand from the energy sector, merchandise importers in the short term.
Furthermore, the gradual reopening is likely to boost demand for commodities such as fuel and raw materials for many manufacturing firms. Kenya is an import-based economy thus importers will need more dollars as international trade gradually returns. A weakening shilling implies that merchandise importers will have to pay a higher price for their commodities which will be passed on to the final consumer.
Since mid-March, Kenya has grappled with declining tea and horticulture exports that have reduced dollar inflows into the country. Massive layoffs and disruptions in major economies such as US and UK have also seen a drop in diaspora remittances piling further pressure on the shilling.
Analysts await the next monetary policy meeting on July 29 to find out measures taken to iron out the volatility in the local currency.
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