The Kenyan shilling is set to strengthen for the next couple of days to Thursday next week as traders expressed confidence in the forex markets.
Experts disclosed that importers and manufacturers had reverted their initial decision to purchase United States dollars in large amounts due to panic following the recent escalation of anti-government protests.
As of Thursday, July 7, commercial banks quoted the shilling at 128.00/129.00 per dollar, compared with last Thursday's closing rate of 128.75/129.75.
The protests which took place across the country sparked jitters among both importers and manufacturers who acted on caution and rushed to purchase more foreign currency.
Increased purchases of the dollars were projected to cause pressure on exchange rates and could have consequently led to a depreciation of the local currency.
"I think we are past the bad stage, everybody has realized the worst protests are probably over. People see discussions likely taking place and that is bringing stability to the market," noted an analyst.
However, bankers noted that despite the cancellation of the protests, there would still be a little bit of cautious trading of the foreign currency against the shilling but it would not cause any huge impact to the local currency.
"We had expected the shilling to trade on the back foot but it's been quite resurgent. Our eyes are still on the protests and expect cautious trading," noted another analyst.
"There is a bit of concern about the recent developments; it's still just a watch and see."
The latest developments come against the backdrop of the recent forecast that the local currency would weaken in the coming days due to the protests.
The slip in the Kenyan shilling was attributed to increased demand for dollars from manufacturers and importers.
"Manufacturers and importers are starting to cover their mid-month and month-end needs,” noted one of the financial experts.
Despite the projections, the Kenyan currency still stands as the best-performing currency globally. According to Central Bank manager Kamau Thugge, the local currency had gained by 17 per cent as of June this year.
The stability was attributed to the buy-back of the Ksh310 billion ($2 billion) Eurobond that matured in June this year.
Other factors that boosted the Kenyan shilling include the increase in diaspora remittance, and a hike in dollar inflow from coffee, horticulture and tea exports.
