When & Why Shilling Will Begin to Depreciate After Gaining Against Dollar- Report
Finance and business experts foresee a decline in the value of the Shilling in the coming months, despite its previous gains against the Dollar.
According to the Market Perceptions Survey carried out by the Central Bank of Kenya (CBK), analysts observed that the projected decrease in April and May would be driven by the anticipated surge in demand for dollars within the nation.
The specialists clarified that there would soon be an increased need for dollars due to the expected restart of importing goods and the distribution of dividends to foreign investors.
Numerous importers refrained from engaging in business due to the exorbitant expenses associated with purchasing goods and importing them.
So, if importers were to return to their previous business operations before Shilling’s appreciation, it would likely exert pressure on the exchange rate, especially considering that imports and dividend payments are conducted in dollars.
However, banks and businesses observed that the impact wouldn’t be significant.
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“Respondents expected the Shilling to strengthen supported by improved USD supply in the market, positive investor sentiments following the successful Eurobond issuance, diminished short-term debt sustainability concerns, reduced pressure from the import bill, strong diaspora remittances, attractive yields which could continue to draw portfolio flow into the country and flows from development partners.
“However, respondents expect that the resumption of the normal importation cycle and increased demand for dividend repatriation could keep the exchange rate slightly under pressure,” read the report in part.
The Shilling has experienced significant appreciation against the dollar in the past few months, with the current exchange rate standing at Ksh127 per dollar.
The Shilling was notably recognized by the World Bank as the top-performing currency in Sub-Saharan Africa, having surged by 16 percent from February to March.
In January, the dollar averaged Ksh150, while in February and March, it ranged between Ksh130.
The Shilling experienced a rise in value following Kenya’s acquisition of funds to settle the USD 2 billion Eurobond due for maturity in June.
When & Why Shilling Will Begin to Depreciate After Gaining Against Dollar- Report