• The value of the Kenyan Shilling is expected to surpass 160 against the dollar, leading to further financial distress for consumers
• The shilling reached an unprecedented new low against the dollar last week due to a surge in demand for the greenback
• This development poses a fresh headache for the Kenya Kwanza administration and the banking regulator
The value of the Kenyan Shilling is expected to surpass 160 against the dollar, leading to further financial distress for consumers.
Photo courtesy; Google
The shilling reached an unprecedented new low against the dollar last week due to a surge in demand for the greenback.
Traders say that the shilling appears poised to surpass the 160 threshold in its exchange rate against the US dollar, despite efforts by the State to prevent its decline.
This development poses a fresh headache for the Kenya Kwanza administration and the banking regulator.
According to data from the Central Bank of Kenya (CBK), the shilling reached a historic low for the official banking regulator’s printed rate on Thursday, with an average exchange rate of 149.7882 against the dollar.
Retail dollar buyers are currently paying up to Sh157 per unit in banking halls due to the increasing demand for the greenback.
Several major banks had set their selling price for the dollar between Sh155 and Sh157 per unit, while their buying price ranged from Sh141 to Sh148.
Standard Chartered Bank Kenya and Equity Bank quoted the US dollar at Sh155 and Sh155.7 per unit respectively on Thursday, while purchasing it at Sh141 and Sh146 respectively.
Stanbic Bank was selling the dollar at Sh156 and buying at Sh146 per unit. Similarly, Family Bank is selling the dollar at Sh156 per unit and buying at Sh152 per unit, just like most foreign exchange bureaus.
I&M Bank was selling the dollar at Sh156.3 per unit, while NCBA was selling it at Sh156.25 per unit.
The current economic crisis in Kenya has been catalyzed by the weakening shilling, which is expected to further burden the already struggling consumers.
The high cost of living has already pushed many into poverty. Additionally, the depreciating shilling is now posing a threat to fuel prices, which have already caused public outrage.
The depreciation of the shilling poses a significant challenge to Kenya due to its reliance on imports.
Consequently, any further devaluation of the domestic currency is anticipated to exacerbate the cost of living, inflicting additional hardship on households already burdened by soaring fuel and food expenses.
This, in turn, will contribute to the country’s mounting electricity expenses and the distress associated with servicing its debts.
Buyers, for both trading and hedging purposes, will continue to bid higher for the dollar due to the ongoing scramble for the currency.
Despite CBK’s strict penalties on forex market manipulation and a government-supported fuel import agreement, the local currency has continued to decline since the start of the year.
The new foreign exchange code, supported by the CBK, emphasises that market participants must refrain from employing trading strategies or quoting prices with the purpose of impeding market functioning or jeopardising market integrity.
The code stipulates that certain tactics should be avoided, as they have the potential to create unwarranted delays, manipulate prices, and disrupt the transactions of other market participants, ultimately leading to a distorted perception of market conditions such as price, depth, and liquidity.
“Such strategies also include collusive and, or manipulative practices, including but not limited to those in which a trader enters a bid or offer with the intent to cancel before execution (sometimes referred to as “spoofing,” “flashing.” or “layering”) and other practices that create a false sense of market price, depth, or liquidity (sometimes referred to as “quote stuffing” or “wash trades”),” says the code.
