Kenyan Shilling Seen Falling on Reduced Tourism

(Bloomberg) --

Kenya’s shilling, which depreciated 3.5% against the dollar to 105 in the first quarter, may weaken to 105.50 in the three months through June as central bank intervention is limited by the need to strengthen buffers and risk aversion increases due to the coronavirus pandemic.

“Sentiment for shilling has weakened,” according to a presentation by Nairobi-based NCBA Group Plc, Kenya’s second largest lender by deposits and customers.

Key Insights:

• The currency of East Africa largest economy could drop to 106 in the third quarter and pare some losses to 105.80 in the final three months of 2020.
• Reduced international travel, tourism and exports will slow dollar flows, while remittances and capital flows, which usually finance the gap, will be hurt by the downturn in source markets.
• Prospects of lower interest rates may also weaken shilling appeal.

©2020 Bloomberg L.P.