The Kenyan shilling could plumb new lows after depreciating to a record against the dollar following demand by the nation's biggest company for foreign currency.
The shilling touched 108.66 per dollar, its weakest yet, extending losses this year to 7%, according to data compiled by Bloomberg. Demand for foreign exchange amid low supply could drive it even lower, according to Murega Mungai, trading desk manager at AZA, Africa's biggest non-bank currency brokerage.
“A big factor behind the shilling's latest tumble is one of Kenya's best success stories -- Safaricom -- as the company pays out shareholder dividends,” Mungai said. “There is also increasing demand for dollars from importers as the country gets back to business. With inflows from Kenyan export staples still well below par, we expect the current negative pressure to continue and the shilling to plumb further lows in the coming days and weeks.”
A decision by the government to lift a five-month ban on imports of used clothes and shoes will also add to the pressure against the shilling, he said.
Kenya's foreign-exchange reserves have declined for six consecutive weeks to about $9.25 billion, sufficient to cover the equivalent of 5.61 months of imports, according to Central Bank of Kenya data.
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