Shilling slumps to Ksh.117 mark on dollar shortages

The Kenya shilling has slumped below the Ksh.117 mark against the U.S dollar as the local unit continues to post steady weakness.

The shilling was quoted at Ksh.117.01 at the close of trading on Wednesday from Ksh.116.95 on Tuesday.

The weakness in the local unit has been linked to dollar shortages in the market as import traders face higher import bills.

“We expect the local currency to hit the Ksh.117 mark against the U.S dollar this week as a result of increasing dollar shortage as global oil prices remain elevated on the back of higher import bills and reduced dollar inflows from key export earning sectors,” noted analysts at AIB-AXYS Africa.

Other factors tied to the shilling weakness include the stock piling of hard currencies by merchandise traders and the widening current account deficit which has been exacerbated by rising import costs.

So far in 2022, the Kenyan shilling has already shed 3.5 per cent of its value against the green buck after registering steady weaknesses from the start of the year.

The Central Bank of Kenya (CBK) has remained unshaken by the depreciation of the local unit, insisting constantly that the valuation of the shilling does not differ with that of other leading world currencies with context to the U.S dollar.

High official reserves currently at an equivalent 4.9 months of import cover and improving diaspora remittances are expected to partially support the Kenyan shilling by acting as a buffer against the documented headwinds.