Shilling hits new low against the US dollar

By Jackson Okoth

The shilling Tuesday continued on its losing streak to exchange at Sh94.75 against the dollar.  This came as the local unit reacted to a wave of global equity sell offs, importer demands and monetary actions of the Central Bank of Kenya (CBK).

“We anticipate the shilling to hit the Sh100 level to the greenback in the coming days. Central Bank has already shown that it is not prepared to move in on interest rates. What we need is substantive remedial action from the monetary authority to stop the shilling slide,” said AlyKhan Satchu, an investment analyst.  CBK appears to take the largest share of the blame on shilling woes, especially after admitting that it is unable to contain speculative activities on the local unit.

However, there are those who feel that what is happening to the shilling is out of CBK’s orbit.

“The shilling is sulking because of what is happening on the global scene. Even the Central Bank has run out of ammunition and is unable to the deal with the speculative premi-um on the shilling coming from global players,” said George Bodo, Equity Analyst at ApexAfrica Capital Limited.  Analysts say the local unit could continue on its downward slide with a possible resistance at Sh95 to the dollar. Incidentally, there appears to be a correlation between the shilling performance and activity at the Nairobi Stock Exchange (NSE).

The bourse remained bearish as the NSE 20 share index plunged further down 3.4 per cent to 3,520.47 points.

On Monday, turnover at the bourse remained low at Sh207.2million. The NSE 20 share index lost 2.1 per cent to 3645.1 points.

Experts maintain that the downgrade of the US debt by the Standard & Poors will impact on other credit ratings and investor confidence worldwide.

Reverse Repo

Expectations are that there will be more chances of a sustained violent sell-off globally, engulfing risky asset classes, says a market report by Apex-Africa.

CBK used reverse repos for a second day Tuesday after injecting Sh15 billion into the market on Monday.  Traders said the operations were fuelling the shilling’s weakness.

The bank started injecting funds into the money markets through reverse repos last month.