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Kenyan shilling to remain firm despite elections

Strengthening or weakening of the shilling will primarily be determined by events on the political field.

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The Kenya shilling is expected to remain firm even as the country gears up for the Aug 8 elections.

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Data from the Central Bank of Kenya(CBK) indicates that the shilling was strong towards the end of the previous week due to an improvement in dollar supplies, boosted by a sell-off of hard currency by commercial banks looking to cope with a liquidity squeeze.

The shilling traded between Ksh103.75 and Ksh104.05 against the dollar, compared to the previous week where it traded between Ksh103.80 and Ksh103.40.

The Central Bank is increasingly intervening in the market through the sale of dollars to withdraw liquidity and ease depreciation pressure on the shilling.

The Kenyan shilling in mid-July touched a six-month low of Kshs 104 due to dollar demand from oil companies, food importers and firms that were paying dividends to investors abroad.

Market analysts remain optimistic of the shilling's stability even after the elections given central bank’s usable foreign exchange reserves of $7.9 billion which could stave off any wild swings by the local unit.

“Bearing in mind the central bank’s intervention, we feel that we should remain just about this level,” a commercial bank trader is quoted by the The East African newspaper.

The elections have seen with it an increase in cash circulation thanks to inflow of campaign money in the economy eventually leading to inflation.

During the last election, the shilling was relatively stable after the CBK intervened by selling dollars directly to the market to prop up the local currency.

Economists are of the opinion that strengthening or weakening of the shilling in this elections will primarily be determined by events on the political field.

The shilling was relatively stable in the 2013 polls after the CBK intervened by selling dollars directly to the market to prop up the local currency.

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