The local currency hovered
near the key level of 3700 during the week ending March6, 2020, oscillating in
a narrow range, with on and off demand, mostly from corporate players as import
demand remained muted on account of Coronavirus. Trading was in the range of
3790/3715. In the money markets, overnight funds were priced at 6% while one
week held at 9%.
In the fixed income segment, there was primary auction. Trading activity was
confined to the secondary market.
In the regional currencies, the Kenya shilling was on the back foot as
commercial banks were seen building dollar positions following the Central Bank
announcement of a dollar purchase plan of 100 million per month to build
foreign reserves. This triggered the currency to depreciate, hitting 102.50/70
level.
In the global markets, the US dollar fell amid expectations that the Federal
Reserve will cut interest rates further after slashing them by 50 basis points
in an emergency move to shield the economy from the effects of the Coronavirus.
Going forward, markets
priced another 50 basis points at the upcoming March 18-19 meeting and another
25 bps for April.
Globally, it is expected that the major Central Banks will follow suit and
remain aggressive to mitigate effects of the epidemic.
“Outlook for the shilling indicates a range bound unit, with on and off demand
mainly driven by cyclical dividend payments by multi nationals, with less
pressure expected from the import side as activity remains curtailed due to
China epidemic,” says Stephen Kaboyo, an analyst and Managing Director at Alpha
Capital Partners.
