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Differing projections emerged this week on the future fate of Kenya’s shilling, which has risen of late against the dollar thanks to heavy dollar selling from offshore accounts and healthy interest in Kenyan government bonds from foreign buyers. On Friday the shilling traded 76.85/77.15 against the dollar after several weeks mired in a monotonous 77.50-78.50 band.
According to Absa Capital, a South African investment bank, Kenya’s shilling–which has already lost nearly 20% of its value over the past year–will be under “continued pressure…due to lower receipts, including exports and remittances” in 2009. Moreover, because Kenya is a net importer, its balance of payments can thus also be expected to further decline.
However, per Kenya’s CFC Stanbic Bank, the currency “is expected to strengthen against the dollar for the rest of this half-year, lifted by the recovery of the global economy [and thus export recovery], sluggish dollar demand at home and earnings from tourism.” That said, analysts there admit that the Central Bank of Kenya (CBK) “could stem any gains if it continues soaking up foreign exchange from the market to shore up its official reserves.” Reserves are still below the four months import cover that the bank is meant to maintain. Yet the shilling “could strengthen towards 75.00 against the dollar,” if the CBK steered clear of the market, opined one trader.