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Mar 20, 2023
Unrelenting Pressure Sees Kenyan Shilling Drop 60 Straight Days
(Bloomberg) -- Kenya’s shilling dropped to a new record after 60 straight days of declines, its longest losing streak in data going back to 1988.
The shilling traded 0.1% lower at 130.15 to the dollar as of 10:55 a.m. in Nairobi, extending its year-to-date loss to more than 5%.
The currency of East Africa’s largest economy has been hit by concerns about rising US interest rates, dwindling foreign-exchange reserves, and a deteriorating balance of payments, according to Genghis Capital, which said it expects the shilling to trade as low as 161.40 per dollar by year-end.
That would mark the biggest annual depreciation since 2008, when the currency tumbled 23%, according to data compiled by Bloomberg.
Kenya’s foreign-exchange reserves dropped to $6.56 billion as of March 16, an 11-year low and sufficient to cover just 3.66 months of exports. The central bank’s statutory requirement is to maintain at least four months of coverage.
The central bank will probably raise its benchmark interest rate from 8.75% at its next Monetary Policy Committee meeting on March 29, Genghis said, after annual inflation quickened for the first time in four months to 9.2% in February.
Commercial lenders in Kenya are charging an average spread of 7.50 shillings on the official exchange rate, with some charging as much as 10.50 shillings, Genghis said.
©2023 Bloomberg L.P.
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