NAIROBI, Sept 22 – Most frontier Africa currencies are likely to remain under pressure next week (26-30 September), with Kenya and Uganda’s shillings both likely to extend a series of record lows against the dollar as foreign investors flee high-risk assets.
KENYA
Kenya’s shilling tumbled to a new all-time low of 98.50 on Thursday and may well fall further next week due to general risk aversion stemming from debt problems in the euro zone and worries about the health of the U.S. economy.
At 1200 GMT, commercial banks quoted the shilling at 97.95/9815 to the dollar, 3.4 percent weaker than last Thursday’s close of 94.60/80.
The psychologically key 100-to-the-dollar is now a very real consideration — a level that was unthinkable a year ago when the unit looked stable around the 80 mark.
“We will take a cue from the global environment. We have seen the U.S. dollar being bought across the board as a lot of investors around the world sell assets to buy dollars,” said Dickson Magecha, a senior trader at Standard Chartered.
Magecha attributed the shilling’s fall to global risk aversion as investors rushed to damp risky assets, adding that any central bank intervention would only slow down the pace of the unit’s weakness rather than achieving an about-turn.
The central bank sold dollars on Wednesday, the third such intervention in as many weeks.
A trader with a commercial bank who did not wish to be named said the central bank would need to sell about $100 million in the days ahead to stem the fall.
Official usable foreign exchange reserves fell to $3.836 billion last week from $3.907 billion from the previous week.
Source: Reuters Africa newsletter
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