THE shilling maintained continuous depreciation at the beginning of the month and may fail to sustain the pressure due to growing demand of US dollar from SMEs as China reopening business.
The shilling fall is still insignificant to derailed investors projections but need a back up to nurse its two months continuous depreciation wounds since the outbreak of Covid-19 in the country.
The shilling traded 2,303/80 yesterday compared to 2,300/75 at the beginning of March.
NMB Bank daily e-Market report said the shilling opened up moderate activity in the first day of this month with importers dominating the market.
“The first trading session of the month saw moderate activity with importers dominating the forex market looking for dollars to cover for their matured obligations,” NMB, one of the leading banks, said on Tuesday.
The bank, largest in term of profitability, said despite seeing dollar inflows in the market from cross boarders business the growing demand are also on increasing side.
“With businesses resuming in China,” NMB said, “we continue to see SMEs dollar demand growing but also inflows are promising following a pick in activities at some of our borders”.
Orbit Securities said yesterday on its weekly market synopsis report that the activities on the Interbank Foreign Exchange Market (IFEM) rose by 16 per cent for week ending last Friday.
However, the growing activities failed to alter the local currency fall “as the shilling maintained continuous depreciation”.
The total value of transactions on the IFEM was 9.75million US dollars compared to 8.4 million US dollars realised during the previous week.
The weighted average exchange rate during the end of the week was 2,303/30 against a US dollar.
In Africa, South Africa’s rand firmed early on Monday, as the government partially lifted a lockdown that has battered an economy which was already in recession before the coronavirus crisis.
South Africa is letting more people outside for work, worship, exercise or shopping from Monday, and allowing mines and factories to run at full capacity to try to revive the economy.
Globally, the UK pound rose to a three-week high against a broadly weaker dollar on Monday as Britain relaxed lockdown restrictions, but the market’s net short position on sterling is the largest in more than five months, suggesting traders remain negative.
The pound is being weighed down by a number of factors including Britain’s high Covid-19 death rate, a lack of progress in Brexit negotiations, a bleak economic outlook, and the Bank of England (BoE), considering negative interest rates.
On other hand, China’s yuan ended its domestic session at its strongest level in one and a half weeks, despite giving back some gains in late Asian trade amid renewed tensions between Beijing and Washington.
Gains were trimmed after a Bloomberg report, citing sources, said China had ordered major state-run firms to pause some US agricultural goods purchases as Beijing evaluates tensions with Washington over Hong Kong.