The Kenyan Shilling has been projected to strengthen against the United States Dollar from next week following reduced foreign currency demand by fuel importers and manufacturers.
According to experts, the Shilling will stabilise slightly against the dollar after manufacturers and fuel importers resorted to reducing their dollar purchases.
As of Thursday, August 22, commercial banks quoted the shilling at 128.50/129.50 per dollar the same level as last Thursday.
“I’m hoping a bit more demand might come onto the market, or it’s likely to strengthen,” noted one expert who spoke to Reuters.
Reduced dollar purchases are expected to minimise the pressure on the exchange rates thus causing the local currency to stabilise against the greenback.
This comes after the Shilling remained unchanged for quite a session for about a week following the intervention by the central bank on the exchange rates.
The shilling remains the best-performing currency globally after gaining by about 17 per cent against the dollar.
This is despite its recent weakening following the downgrade by Moody's credit rating agency that reduced the country's credit ratings to "Caa1" from "B3"
Moody's downgrade was attributed to the country's inability to pay its external debts due to Kenya's poor fiscal policies coupled with the recent anti-government protests.
"The negative outlook reflects downside risks related to government liquidity," read part of a statement by the credit rating agency.
Meanwhile, the local currency's incredible performance this year has been attributed to several factors including the government's decision to repay the Ksh310 million ($2 billion) Eurobond that expired in June this year.
Other factors that boosted the shilling include the increased dollar inflow from diaspora remittances, dollar inflow from tear and coffee exports and over-subscription of the infrastructure bonds issued in February this year.
