The Kenyan shilling has continued to struggle against the US Dollar, dropping to historic lows last week, but analysts say the local currency remains resilient.
During the week, the shilling depreciated by 0.2 per cent against the dollar to close the week at Sh121.8 per dollar from Sh121.5 recorded the previous week.
The depreciation of the local currency was partly attributable to increased dollar demand from importers, especially oil and energy sectors against a slower supply of hard currency.
Areas of pressure
Further, a Cytonn Investments report says the pressure on the shilling has been emanating from the high global crude oil prices, supply chain bottlenecks and increasing demand for green bucks.
“We have also seen a continued hike in the United States of America Federal interest rates in 2022 to a range of 3.75-4.00 per cent in November 2022 has strengthened the dollar against other currencies and has caused capital outflows from the Kenyan market,” said the report.
An ever-present current account deficit estimated at 5.3 per cent of the gross domestic produce (GDP) in the 12 months to September 2022, the same as data recorded in a similar period in 2022, will continue piling pressure on the shilling.
The need for government debt servicing also continues to pile pressure on forex reserves given that 68.1 per cent of Kenya’s External debt was US Dollar denominated as of July 2022.
