Kenya’s shilling has come under pressure as the dollar strengthens, with investors anticipating the Federal Reserve increasing interest rates.
The currency of East Africa’s largest economy fell to 113.61 against the dollar on Monday, the weakest on record, before paring the loss to 113.49 by 3:20 p.m. in the capital, Nairobi, according to data compiled by Bloomberg. The Bloomberg Dollar Spot Index, which tracks the performance of a basket of 10 leading global currencies versus the U.S. dollar, gained.
The dollar “strengthening has received legs this year,” Churchill Ogutu, an economist at IC Asset Managers, said on Monday in response to emailed questions. Recent economic data releases “have teed up the odds of a rate hike as early as end this quarter, which has bolstered USD strength against other currencies,” he said.
The shilling remained weaker as Central Bank of Kenya moved to stabilize the currency — it offered 10 billion shillings of seven-day term-auction deposits on Monday, after staying out of the market for most of the days of last week.
The currency will remain under pressure due to bets on the dollar continuing to gain, reduced inflows from exports, and elevated global oil prices, Nairobi-based AIB-AXYS Africa said Monday in an emailed note.