Just two weeks after experts forecasted a decline in the Kenyan shilling’s value, the local currency slipped against the US dollar on Friday, July 19.
According to Reuters, the shilling weakened due to heightened demand for foreign currency from commercial banks, which led to a shortage of dollars and increased pressure on exchange rates. As of Friday, commercial banks quoted the shilling at 131.00/132.00 against the dollar, up from 130.00/131.00 the previous day.
One trader at a commercial bank indicated to Reuters that the surge in demand is largely coming from the interbank market, with no significant demands from oil marketers. “There’s very muted demand, but even less supply of dollars,” another forex trader added.
The currency’s decline has been further exacerbated by recent protests that have created chaos and instability in the forex market.
The weakening trend follows a downgrade by Moody’s, which reduced Kenya’s credit rating from “B3” to “Caa1,” highlighting concerns over the country’s mounting debt. This downgrade has triggered uncertainty among investors.
Notably, the Kenyan shilling had been ranked as the best-performing global currency just two months ago, having appreciated by approximately 17% against the dollar. This positive trajectory began in February and continued until recent weeks, when the currency began to slide.
The earlier gains were attributed to factors including the government’s strategic buyback of a Ksh310 billion ($2 billion) Eurobond that matured on June 23.
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