Shilling heads towards troubles

The shilling has exhibited a volatile trend and may lose further ground in days ahead unless the market experiences increased dollar inflows, bankers have warned.

The shilling trouble came just four days after the government's new fiscal year that among other things mapped out strategies to rescue the unit from further depreciations.

Commercial banks quoted the unit at 1580/1592 level against the greenback yesterday, a drop from 1560/1575 of pervious week.

The National Microfinance Bank (NMB) said on Tuesday that a shortage in dollar inflows was seen in the market and all the minimal supply got snapped up by importers and banks.

 "The shilling was volatile and may lose further grounds in days ahead unless we see decent dollar inflows," NMB said in its e-market daily report.

Standard Chartered Bank said on Wednesday the shilling lost some ground against the US dollar on the back of demand in the interbank market.

 "Today we expect a similar trend with low level of volatility," the StanChart said on its Daily market report.

The Minister for Finance and Economic Affairs, Dr William Mgimwa said the government wants to maintain a stable and market determined exchange rate.

Meanwhile, the interbank market remains well funded with the highest overnight (O/N) offer rate declining to 14.5 per cent from 15 per cent while the lowest offer remained at five per cent. 

The average O/N offer rate increased by 60 basic points to 11.31 per cent with reported traded volume at 26.7bn/- a decline from 33.7bn/- traded a day earlier.

"The liquidity has materially improved on interbank. We may see this sustained as we await government budget debating to close before spending starts," StanChart said.

It added: "The improved condition will increase banks confidence in investing which may see a decline in rates."

On repurchasing agreement (Repo), Barclays bank reports in auction on Tuesday, the central bank received a total of one bid for the seven-day repo and the same for the 14 days repo, at a rate of six and nine per cent, respectively. Total amounts tendered amounted to 25bn/-.
Source: The Daily News,, reported by Abduel Elinaza
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