Kenya’s Shilling Predicted to Weaken in Upcoming Week

Kenya’s shilling is expected to face further weakening in the coming week due to the increasing demand for dollars from the manufacturing and energy sectors.
Traders have also predicted a decline in the value of Nigeria’s naira and Zambia’s kwacha, while Ghana’s cedi and Uganda’s shilling may strengthen during the same period.
According to data from Refinitiv, commercial banks have quoted the Kenyan shilling at a record low of 141.70/90 per dollar, as compared to last Thursday’s closing rate of 141.30/50. This steady decline in value has been a cause of concern for the country’s economy.
The weakening of the shilling can be attributed to the rising demand for dollars from the manufacturing sector. The manufacturing industry relies heavily on imported raw materials and machinery, which need to be paid for in foreign currency. As a result, companies in the sector are placing significant pressure on the shilling by buying dollars to meet their payment obligations.
Additionally, the energy sector is also contributing to the increased demand for dollars. The importation of petroleum products, such as oil, requires companies in the energy industry to purchase dollars to settle their import bills. This has further exacerbated the weakening of the shilling.
Traders and analysts closely monitoring the foreign exchange market have expressed concerns about the continuous decline of the shilling. The sustained weakening trend poses challenges for businesses that rely on imported goods and services, as well as for individuals who travel abroad or remit money.
The impact of a weaker currency extends beyond just the manufacturing and energy industries. It affects the overall cost of living, as the price of imported goods, such as food, increases. This can lead to inflationary pressures, reducing the purchasing power of consumers and impacting the economy as a whole.
However, there is some optimism for other African currencies. Traders have predicted that the Ghanaian cedi and Ugandan shilling may strengthen during the upcoming week. The reasons for this potential appreciation are not yet clear but could indicate positive economic developments in those countries.