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Kenyan shilling dropped 30% today

navysky

By navysky,
in Foreign Currencies

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thegente Newbie

thegente

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Posted (edited)

http://www.standardmedia.co.ke/InsidePage.php?id=2000043594&cid=4&

Kenya shilling hits new low, seen "out of control"

Updated 7 hr(s) 50 min(s) ago

Kenya's shilling tumbled 1.86 per cent against the dollar on Tuesday to hit a fresh all-time low of 104.15 to the greenback, and traders said there was no end in sight to the currency's slide unless the central bank intervened aggressively.

The currency's free fall –it has lost close to 30 per cent against the dollar so far this year –exposes a crisis of confidence in the central bank's ability to defend the pummeled currency, tackle inflation and close a widening balance of payments gap.

On Tuesday the Kenya shilling hit a new low of 104.15 to the greenback, [PHOTO/STANDARD FILE]

"The market is looking out to the central bank for some form of support. At the rate the shilling is falling we are expecting 110 by the end of the week or early next week. It's crazy," said Bhavin Chandaria, a trader at Imperial Bank.

The shilling crashed through the key psychological level of 100 on Monday. Market traders said there was little on the horizon to offer support as turmoil in the euro zone, typical end-month dollar demand and panic buying helped drive the shilling south.

"(I) have no idea what it is going to take to turn this bleeding and battered currency around," one senior trader based outside Kenya said.

At 1015 GMT, commercial banks were quoting the shilling at 103.50/70, sharply down on Monday's close of 102.00/20, but off its low after profit taking by some investors.

The steady erosion of the shilling's value this year has fuelled a sharp rise in consumer prices in east Africa's biggest economy.

The year-on-year rate of inflation is seen rising to 17.4 percent in September from 16.7 percent a month earlier, a median of 10 economists polled by Reuters showed.

OUT OF CONTROL

The consumer rights group Consumer Federation of Kenya (COFEK) said the shilling's fall had "run out of control".

"We shall sooner (rather) than later, be experiencing imported inflation making things worse as importers will be factoring in the increased costs of imports in the unit pricing," COFEK Secretary General Stephen Mutoro said in a statement.

"Regrettably, the real tough times are yet to come," he said.

The shilling's emphatic breach of the 100 level set Kenya's chattering classes alight on social media. On Twitter, the hashtag #thingsstrongerthanthekenyashilling was at one point the most popular worldwide.

Contributions included: "Arsenal's defence"; "Kenyan MPs will to serve the people" and "wet toilet paper".

"We are in an all new territory right now and it's not clear where it could go from here. Guys are watching if the central bank will be back in today," said Wilson Mutai, a trader at African Banking Corporation. The central bank sold on Monday an unspecified amount of dollars for the fifth time this September in an attempt to support the shilling.

The bank said on Tuesday it was not in the market for repurchase agreements, easing market fears it might roll-over last week's reverse repos.

"It is more panic buying. Some people are buying forward and those are the ones putting pressure on the shilling," said Duncan Kinuthia, head of trading at Commercial Bank of Africa.

-Reuters

Edited by thegente
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