Tuesday, April 16, 2024

Shilling to fall past 160 against US dollar again – Economists

The Kenya shilling will fall past the 160 mark against the US dollar in the coming months, economists have said.

The new slide will come after weeks of gain that the Kenya shilling has experienced against the US dollar. As at Thursday, February 29, 2024, the Central Bank of Kenya was quoting the US dollar at an exchange rate of 143.5 to the shilling.

However, the exchange rates quoted by forex bureaus and commercial banks were much higher. The Satellite Forex Bureau was was buying at 145 and selling at 147. The Pacific Forex Bureau was buying at 144 and selling at 148.

Among banks, the NCBA Bank was buying at 143 and selling at 151 while Equity Bank was buying 143.5 at and selling at 149.5.

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The prediction for a downward trend of the local currency has been issued by analysts at Barcelona-based FocusEconomics through a March 2024 outlook report. This report has been based on feedback from panellists drawn from eight financial firms.

“Our panel sees the KES [shilling] weakening from current levels by year-end, though stable fiscal and current account deficits should add support,” the report by the analysts said.

If this prediction holds water, the shilling would lose about Sh. 18 in value to slide past the all time official lows of 161 that were recorded in the last week of January 2024.

On the strengthening of the local currency, the analysts at FocusEconomis attributed the issuance of a Eurobond by the Kenya government and the repayment of USD1.44 billion out of the USD2 billion Eurobond debt whose maturity is in June as the driving factor for the strengthening of the local currency.

“The successful sale of foreign-currency-denominated bonds in mid-February lessened the default risk, boosting the shilling to a six-month high,” the report by the analysts said.

The fall of the shilling was a dramatic turnaround that occurred in about three days, with the shilling recovering to lows of 137 at one point.

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