- The Kenyan Shilling hits a historic low at Sh160.23 per dollar.
- Dollar demand from the energy and manufacturing sectors intensifies pressure on the Shilling.
- Commercial banks align with the Central Bank's rates following a significant gap.
Currency traders in the country stated that dollar demand from the energy and manufacturing sectors has put tremendous pressure on the Kenyan Shilling over the last 2 weeks, forcing it to fall to a new low.
According to a report by the Kenyan Business news publication, BusinessDaily, “the move by the Central Bank of Kenya (CBK) to adopt actual traded rates in the interbank market to determine the official rate has also caused the sharp upward adjustment in the CBK rate, which was previously criticized for being out of line with the effective market rates.”
Therefore, the country's currency depreciated by 2.4% against the US dollar in the first two weeks of the new year, going from Sh156.40 to Sh160.23.
“On top of the underlying depreciation due to demand-side pressure, it (the rate) now represents traded prices in the interbank market—those that banks are actually transacting on. The earlier indicative rate which was aligned to the now removed 20 cents bid/ask spread tended to lag the actual market rate.” a currency trader disclosed.
Currently, the country’s Central Bank's average is closer to the buy/sell average as of commercial banks. As of yesterday, Equity Bank had its dollar rate at Sh162.50 on the sell end and Sh156.95 buying, while I&M Bank quoted the dollar at Sh163.40 selling and Sh158.20 buying.
Prior to this, there was a significant gap between the CBK’s average and that of commercial banks, which brought about a “breakdown of the interbank forex market as the regulator clamped down on lenders who strayed too far from the official rate,” as reported by BusinessDaily.
The Kenyan Shilling was among some of the worst-performing currencies in 2023. The currency experienced its worst hit in over 3 decades, alongside Nigeria, and a few other African countries.