Shilling firms on rise in inflows, low dollar demand

The Kenyan shilling has firmed against the U.S. dollar, gaining about 0.1 percent since Monday following increased foreign exchange inflows amid low dollar demand.

On Wednesday, the Central Bank of Kenya (CBK) quoted the shilling at 103.58 against the dollar, a rise from 103.63 Monday and 103.65 Friday last week.

Analysts attributed the rise to increased foreign exchange inflows from non-governmental organizations and reduced dollar demand from oil importers.

"The Kenya shilling remains relatively firm on account of reduced dollar demand from oil importers," noted Cytonn, a Nairobi investment firm, adding that on a year to date basis, the shilling has depreciated against the dollar by 1.1 percent.

The steady shilling has helped stabilize the foreign exchange reserves, which at the end of last week, according to the CBK, stood at 6.95 billion dollars, an equivalent of 4.59 months of import cover, up from 6.94 billion dollars or 4.58 months of import cover.

A stable shilling means the apex bank does not need to sell dollars to buttress the shilling in case it faces pressure from international currencies.

"The level of forex reserves has now stabilized, an indication of the confidence of the Central Bank with the current level of the shilling," said Cytonn.

However, as it strengthens against the dollar, the shilling is performing poorly against other international currencies. Tuesday, for instance, it weakened 0.2 percent against the Sterling Pound to close at 128.96. Endit