Shilling watch: Crisis induced shocks to continue influencing the direction of the unit

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The local currency recovered from previous week’s losses amid a slow down in appetite for dollars .

On the supply side, inflows from coffee and other commodity traders helped in uplifting the shilling.

Trading was in the range of 3580/90.

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In the fixed income, yields remained flat. The broader flattening bias across the yield curve is likely to persist given the liquidity levels in the banking system. Treasury bills printed at 6.501%,8.224% and 9.801% respectively.

In the regional markets, most African currencies bounced back as market sentiment was boosted by the ongoing Russian- Ukraine talks and the positive data on US oil inventories.

In the global markets, the major highlight was the Federal Reserve action of raising interest rates by a quarter percentage point , the first increase since December 2018. The decision was underpinned by the spiraling inflation in the US. As a result, the US dollar lost momentum as the hawkish rhetoric did not offer any surprises.
In other news, Russia was reported on the brink of a default on its international debt as economic sanctions took a toll and potentially shut the country out of most funding markets.

In energy markets, oil prices dropped to trade below USD 100 per barrel as markets reacted to the US inventory data that showed bigger than expected oil reserves.

Going forward the shilling is expected to remain range bound. Overall, the crisis induced shock is likely to continue influencing the direction of the unit.

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