Shilling firms on rising local demand

Despite the growing demand for US dollars from manufacturing and oil sectors, the shilling has continued to gain ground against the greenback ending up weeks of high volatility.

As the year end holidays are approaching, there are expectations for many people spending the local currency on shopping and travel expenses, the situation that pushes up demand for the shilling.

According to the National Microfinance Bank (NMB) e-market report, the shilling extended gains against the greenback to close the weekend on a strong footing as it marked one of the biggest weekly advances in this year.

After experiencing hard times several weeks ago, the local currency once again gained some stability to close the week at 1,696/1,751.

The Standard Chartered Bank daily market commentary shows that the shilling appreciated against the greenback on last Friday’s trading due to dollar supply to the market from different sectors.

“However, the market continues to post demand from mainly manufacturing and oil sector, with expectations to trade between low to medium price volatility in the market,” it stated.

Liquidity tightness continued to be much more pronounced in the local money market on Friday with overnight lending rates at the highs of 14 per cent, compared to 13 per cent that was seen at the beginning of the week.

The market pulse by Exim Bank shows that the shilling is gaining ground against the US dollar, as most of the key players are offloading their dollars to get the local currency.

Kenya’s shilling held steady early on Monday but traders said they expected it would strengthen in coming weeks as Kenyans abroad sent dollars back to their families during the holiday season.

The shilling was 90.50/70 to the dollar at 0700 GMT, marginally stronger than the 90.55/65 at the close of trade on Thursday, when the central bank sold dollars to help pull the local currency off a 3-year low earlier in the session.

Money sent by Kenyans living abroad - or remittances - is one of the country’s main sources of foreign exchange that will support the local currency.

The Ugandan shilling inched down on Friday due to demand for dollars from companies in the energy sector and traders said it had a stable outlook after the central bank held its key lending rate.

Source: Daily News, reported by Sebastian Mrindoko, from Dar es Salaam, Tanzania

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