Market witnesses very low appetite for the hard currency- demand to fall further

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The local currency traded marginally stronger against the dollar as the market witnessed very low appetite for the hard currency as economic activity remained subdued.
The bid and ask quotes held at 3708/3718. The shilling interbank market remained awash with liquidity as overnight rates Hoover’s around 3% while one week funds held at 4.3%, unchanged for the previous week.

In the fixed income segment, the first bond auction in the new financial year, registered huge uptake, in a large than usual offer size.
The three year bond with coupon of 14%, had a yield to maturity of 15.250% while the 15 year, coupon 14.250%, traded at 14.230%.
The outcome indicates an inverted yield curve which normally is predicator of bad economic times.

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In the regional markets, the Kenya shilling came under pressure on elevated demand against shaky flows to trade at 106.75/95, while the Tanzania shilling was buoyant on improved forex flows, holding at 2312/20.

In offshore markets, the US dollar and other safe haven currencies gained against their riskier peers after the surge in new covid-19 infections in the US, further undermined the case for quick turnaround of the economy.
In a similar trend, commodity currencies lost traction also as oil prices dipped on worries about renewed lockdown in parts of the United States.

In the coming days the shilling will remain hemmed in a narrow range with demand for forex is expected to slump further.

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