Hardly a fortnight after experts predicted the Kenyan shilling would weaken against the United States dollar, the local currency eased against the greenback on Friday, July 19.
According to Reuters, the shilling weakened due to a high demand for foreign currency by commercial banks, resulting in a shortage of dollars and thus putting pressure on the exchange rates.
As of Friday, commercial banks quoted the shilling at 131.00/132.00 against the US dollar, compared to 130.00/131.00 on Thursday.
"We haven't received demands from oil marketers. It's mostly from the interbank space," stated one trader at a commercial bank who spoke to Reuters.
"There's very muted demand, but even less supply of dollars," another forex trader revealed.
The weakening was also attributed to the recent protests that plunged the country into chaos and resulted in instability in the forex market.
Kenya's currency was recently projected to weaken following the downgrade by Moody’s, a global credit rating agency, which cited the country's inability to deal with its bulging debts.
Moody's credit rating agency downgraded the country's credit ratings to "Caa1" from "B3" resulting in jitters among investors.
The weakening of the Kenyan shilling comes hardly two months after it was ranked as the best-performing currency globally, gaining by about 17 per cent against the dollar.
Shilling's road to stability kicked off in February this year and has continued to gain ground against major currencies globally until the last few weeks when it started sliding.
The gains were attributed to several factors including the government's decision to buy back the Ksh310 billion ($2 billion) Eurobond that matured on June 23 this year.
Another factor was the oversubscription of the infrastructure bonds. In February the government sought to raise Ksh70 billion through the issuance of infrastructure bonds but received bids worth Ksh241 billion.
Dollar inflow from tea, coffee, and horticulture exports were also attributed to the stability of the shilling.
