Kenyan Market Analyst Advises Kenyans With Dollar Accounts As Shilling Starts To Weaken

• FX Pesa lead market analyst Rufas Kamau advised Kenyans with dollar accounts to continue saving in the foreign currency
• In an exclusive interview with TUKO.co.ke, Kamau opined that the Kenya shilling would slide back to previous lows as the US dollar was expected to gain more value
• Kamau expounded that since Kenya is a net importer of goods, imports were poised to capture the fresh influx of dollars in the markets sooner rather than later

TUKO.co.ke journalist Japhet Ruto brings over eight years of experience in financial, business, and technology reporting, offering deep insights into Kenyan and global economic trends.

The Kenya shilling lost 0.75% of its value in the last week following the strengthening of the United States (US) dollar.

According to the weekly Central Bank of Kenya (CBK) bulletin, the local currency traded at 131.37 against the US dollar on Thursday, April 18, compared to 130.39 on Thursday, April 11.

On Monday, April 22, the shilling depreciated to 131.78 against the dollar.

"The Kenya shilling remained stable against major international and regional currencies during the week ending April 18. It exchanged at 131.37 per US dollar on April 18, compared to 130.39 per US dollar on April 11," the CBK stated.

What should Kenyans with dollar accounts do?

FX Pesa lead market analyst Rufas Kamau advised Kenyans with dollar accounts to continue saving in the foreign currency.

In an exclusive interview with TUKO.co.ke, Kamau opined that the Kenya shilling would slide back to previous lows as the US dollar was expected to gain more value.

"For anyone holding or earning dollars, it makes sense to convert some dollars to Kenya shillings for immediate expenditure. However, for long-term savings, fundamentals indicate that it is more likely that the Kenya shilling will slide back to previous lows and the dollar will hold value better than the Kenya shilling in the next two years," Kamau explained.

Why will the Kenya shilling depreciate?

Kamau expounded that since Kenya is a net importer of goods, imports were poised to capture the fresh influx of dollars in the markets sooner rather than later.

The US Federal Reserve was also anticipated to hold higher interest rates, thus raising the dollar's strength.

"Imports will sooner or later scoop the new dollars in the markets, and we will be back to the same problem of dollar shortage. With US inflation rising to 3.5% in March, the US Federal Reserve will likely hold rates higher for longer, which could strengthen the dollar further. This is expected to help the dollar recover against the Kenya shilling," he said.

What's the impact of a weak shilling on fuel prices?

Iran's attack on Israel increased tensions in the Middle East, but de-escalation efforts saw oil prices drop slightly.

Kamau noted the cost of Brent oil dropped by 0.47% but was still trading at $89 (KSh 11,748) per barrel.

Kamau said that fuel hikes could occur if the shilling continues to lose ground against the US dollar and the oil price rally continues above $90 (KSh 11,925) per barrel.

"If the shilling starts to lose ground against the dollar, and the oil price rally continues above $90 per barrel, we could start experiencing fuel hikes in the oncoming months," he said.

What bankers said on shilling

• Central Bank of Kenya (CBK) governor Kamau Thugge expects imports to record a growth of 11% from KSh 2.2 trillion in 2023 to KSh 2.48 trillion in 2024 on strong shilling.
• Equity Bank managing director and CEO James Mwangi noted that the value of the shilling was determined by the market's demand and supply of dollars.
• NCBA CEO and Kenya Bankers Association chairman John Gachora believes the shilling would return to its true value above the current rate.
• The World Bank attributed the rise in the value of the shilling to the hike in the CBK's base lending rate and the partial settlement of the Eurobond.

Proofreading by Jackson Otukho, a multimedia journalist and copy editor at TUKO.co.ke