Kenyan Shilling Strengthens Against US Dollar, Adds 0.7% of Value

 

On Wednesday, January 24, the Kenyan shilling gained 0.73% of its value against the United States (US) dollar after days of freefall. CBK governor Kamau Thugge said the shilling was finding its true value. What was the official CBK rate on Wednesday? According to official exchange rates by the Central Bank of Kenya (CBK), the shilling traded at 160.19 against the greenback, down from 161.36 on Tuesday, January 23. The uncommon upswing represented a notable departure from a prolonged decline, during which the local currency experienced a decrease of more than 27% in value against the US dollar over the past year. The shilling previously achieved comparable advancements during the COVID-19 pandemic on December 23, 2020, recording a 1.46% increase in value against the dollar. During that period, the shilling's strength resulted in trading at 109.44, in contrast to its position at 111.04 on December 22, 2020. Why shilling is projected to continue weakening The shilling crossed the 160 mark against the US dollar on Monday, January 15. In an exclusive interview with TUKO.co.ke, FX Pesa lead market analyst Rufas Kamau explained that the confidence in the Kenyan shilling was fast eroding, discouraging foreign direct investments. Kamau warned that manufacturers could soon start hoarding dollars as businesses lose trust in CBK's ability to stabilise the local currency. "This (weakening of the shilling) might lead to more dollar scarcity therefore exacerbating the shilling's fall. Manufacturers and investors expected the 200 basis point rate hike in December 2023 to provide some caution to the Kenya shilling's slide," he cautioned. Why was the shilling on a freefall? CBK governor Kamau Thugge said the shilling was overvalued by between 20 and 25% and accused retired president Uhuru Kenyatta's government of using forex reserves to create an artificially strong currency. Thugge said the over-valuation was realised in 2022 when inflation soared to unprecedented levels beyond the CBK rate of 5% to 7.5%. President William Ruto estimated the dollar would exchange at KSh 120 or KSh 115 against the US dollar following the government-government oil deal with state-owned energy companies in the Middle East. However, the shilling continued to depreciate, with some financial experts predicting it will trade at 200. 

BY TUKO NEWS