SHILLING is expecting to moderate appreciate in this quarter due foreign currencies inflows from agro-exports and tourism.
The shilling will also get a shot in the arm from central bank intervention from both side of the market, National Microfinance Bank (NMB) predicted.
The bank, through its ‘The Market Digest’ said the shilling which depreciated by merely 0.2 per cent in quarter-two (Q2), variables are supporting the local currency gain.
The Market Digest pointed out that the agriculture season sets to kick off in the coming quarter alongside tourism hence pumping more forex in the market to quell US dollar demand pressure.
“…The shilling will likely moderately appreciate given the Central Bank’s participation in the Interbank Foreign Exchange Market (IFEM) on both sides of the market to smoothen out volatility as well as liquidity management,” the Market Digest said.
On other hand, shilling pressure in Q2 subdued as import and export businesses slumped in the said period despite high liquid at forex market. “This is an outcome of slump in business confidence and consequently activities across different sectors of the economy both imports and exports were relatively low,” the Digest said.
The IFEM, despite a very liquid local currency market, volumes traded dropped to 441million US dollars in Q2 from 466million US dollars of previous quarter.
The shilling and US dollar traded sideways in Q2 opening at 2,235/-to the dollar and traded three shillings below its open exchange rate.
“…this was on the back of subdued demand as credit to private sector and money supply growth slowed,” NMB’s Digest said.
Comparatively, during Q2, the shilling depreciated by only 0.2 per cent against a depreciation of 2.4 per cent in Q1.