The local currency is on a rapid fall as demand for the world main funding and settlement currency continue to escalate to unprecedented levels.
The spreads on the shilling were widening as investors continued to flee from riskier assets.
The pressure on the shilling is expected to get worse before it gets better, testing record levels, as the mad scramble for the dollar is expected to increase even further in line with the trend in the global markets.
According to Stephen Kaboyo, the Alpha Capital Markets boss, ‘ ‘Any efforts to defend the currency at this stage would be wasted effort because of the sentiment driven weakness of the shilling.’’
Across the border, Kenya central bank governor Patrick Njoroge said some of the Kenyan shilling’s recent weakening was caused by market misunderstanding of the central bank’s plan to boost its reserved by buying dollars from the market, and some “malicious actors”, The shilling is hovering close to its record low of 106.70 per dollar, mainly due to the strengthening of the dollar and concerns about the impact of the coronavirus on Kenya’s export earnings.
Njoroge, however, attributed some of the weakening to traders who did not understand the central bank’s offer of buying $100 million a month for four months to shore up reserves, which was announced on March 3
In the other news, Kenya’s government plans to seek help from the International Monetary Fund, pay pending bills to suppliers and quickly process company tax refunds to support the economy in the face of the coronavirus crisis, officials said.
Patrick Njoroge, the central bank governor, told a news conference on Tuesday that the government is seeking emergency assistance from the IMF of up to $350 million-Reuters reported.
President Uhuru Kenyatta, also told business executives on Monday that fiscal stimulus measures would be will be announced later this week.
Kenya’s central bank has already implemented stimulus measures, cutting interest rates by a heftier than expected 100 basis points on Monday and reducing the amount of cash that banks are required to hold as reserves.