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Kenyan shilling unyielding against the U.S. dollar

Xinhua, May 2, 2017 Adjust font size:

The Kenyan shilling firmed against the U.S. dollar on Tuesday to close the day at 103 buoyed by low dollar demand from importers.

The shilling had closed on Friday last week at a high of 103.1 boosted by Diaspora inflows and analysts had expected the rally to persist.

Tuesday, commercial banks quoted the local unit at 103.00/02 as dealers noted there was weak dollar demand from importers amid tight liquidity in the money market.

On the other hand, the Central Bank of Kenya (CBK) put the shilling against the dollar at 103.1 up from 103.2 last Friday.

There has been an increase in dollar inflows into Kenya in the last one week especially from government securities and external loans, pushing up foreign exchange reserves to enable CBK support the shilling.

Kenya's forex reserves stand at an all-time high of 8.3 billion dollars or an equivalent of 5.5 months of import cover from 8 billion dollars or equivalent to 5.3 months, according to the apex bank.

"We expect the shilling to come under pressure but with the current forex reserve level, we believe the CBK will be able to support any depreciation in the short term," Cytonn, a Nairobi-based investment firm, noted Tuesday.

However, going forward, Cytonn expects the shilling to weaken due to global strengthening of the dollar leading to an increase in the cost of imports.

And given that Kenya is going through an electioneering period, Cytonn noted that there would be an increase in money supply due to campaign funds. Endit