Market watch: shilling to come under pressure as the economy reopens

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The shilling was slightly firmer for the good part of the week as seasonal end month flows mainly from commodities exporters and remittances offered support.
However towards the end of the week, the unit slipped a touch on some pockets of demand.

Trading was in the range of 3545/55 compared to opening levels of 3540/50. On the overall, it was more of a cautious mode as financial markets awaited government guidance on the likely future course regarding measures to control COVID 19 after the expiry of the 42 day lockdown.

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In the regional markets, the Kenya shilling was unchanged against the dollar in slow trade. Commercial banks quoted the unit at 108.50/70.

In the global markets, the US dollar dropped to a one month low following the Federal Reserve’s reassurance that interest rate hikes remain distant. The comments brought the greenback’s persistent rally on halt. The dollar weaker tone helped lift the British sterling and the Euro to their highs in over a month.

Looking ahead, it is likely to be range trading for the shilling, with all anchored on the plethora of measures to manage the pandemic. However, reopening of the economy could pressure the shilling.

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