The Kenyan Shilling strengthened further against the United States Dollar on Wednesday hardly two days after experts predicted it would gain.
According to Reuters, the local currency strengthened due to an increase in dollar inflow mainly from the agricultural and tourism sectors.
As of Wednesday, September 4, the shilling traded at 128.25/129.25 to the US currency, compared with Tuesday’s closing rate of 128.50/129.50.
Earlier in the week, experts noted the local currency was set for major gains due to planned intervention by the Central Bank on exchange rates.
The local currency had also been tipped to gain further on muted foreign currency demand from the manufacturing sector and fuel importers.
Kenya's recent decision to issue infrastructure bonds was also projected to positively impact the Shilling as investors used their dollars to purchase tax-free government securities.
The Kenyan Shilling has consistently gained for the past eight months, shedding off doubts that it would weaken following back to back credit rating downgrades by American credit rating agencies such as Moody's and S&P.
Subsequently, the recent anti-government demonstrations were also forecasted to contribute to the Shilling's weakening as investors expressed jitters over the country's economic stability.
Despite the protests, the local currency continued to gain ground against major currencies globally even as traders exuded confidence in the forex market.
However, despite strengthening to new levels, the Shilling for the past one week remained unchanged as dollar demand from manufacturers matched foreign currency supply by the tea exporters.
“It’s very stable. Demand and supply seem to be evenly matched. There’s been some good foreign exchange demand but offshore flows are coming for the infrastructure bond,” one trader who spoke to Reuters stated.
The local currency's unchanged status was also attributed to the Central Bank's decision to purchase dollars to tame volatility of the Kenyan Shilling.
