- Central Bank of Kenya (CBK) report showed the shilling continued to exchange at an average of KSh 142.78 as of Thursday, August 3
- Commercial banks set the exchange rate KSh 150 as the shortage of the US currency continued to bite, increasing imports purchase value
- Lead market analyst at FX Pesa Rufas Kamau attributed the continued shilling depreciation to increased dollar demand in the country
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Kenyans' demand for the dollar has more than doubled even as the shilling continues to lose value against the US currency.
The Central Bank of Kenya (CBK) average exchange rate stood at KSh 142.78 per dollar as of Thursday, August 3.
Dollar shortage and demand
However, most commercial banks increased the rate of selling the dollar to a maximum of KSh 150 as the shortage of the currency increased.
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According to the lead market analyst at FX Pesa Rufas Kamau, the exchange rate hiked due to increasing dollar demand in the market.
"People are taking a flight to safety. There is too much demand for the dollar as people have lost faith in Kenya shilling due to its losses to the dollar since the COVID-19 pandemic," said Kamau in an exclusive interview with TUKO.co.ke.
The trend is expected to continue until June 2024, escalating the rate to KSh 150.76, as the government repays its debut Eurobond.
Business Daily reported that 11 banks are racing to sell the dollar at an average of KSh 150, a move that could further pile up pressure on the shilling.
Other banks were selling the greenback at an average of KSh 146.7 and KSh 149.1 as of Monday, August 8, 2023.
The hike could lead to a new wave of price increases as traders and business people are forced to dig deeper into their pockets to pay for imports.
Stabilisation of the shilling
The trend dashed the expectation of the shilling regaining its value in the near future as the dollar weakens.
The Kenyan shilling lost 14% of its value against the United States (US) dollar during the first half of the fiscal year.
According to the FX Pesa Market Outlook report, foreign investors were the worst hit by the depreciating shilling as they lost in dollar terms.
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