Business Daily (Nairobi)
Millicent Kamau
2 July 2008
There was active trading at the forex market yesterday as the local unit gained 10 cents from the previous trade following an end month dollar demand.
This follows a rush by importers to make their end of month payments at the ports.
The local unit opened trade at Sh65.30 buying and 65.40 selling but by mid afternoon the unit had gained to Sh65.20 buying and Sh65.30 selling. Dealers attributed the movement to market correction .
"The end month dollar demand that has being weighing down the local unit has already been factored in the market and this is seeing the local unit gaining against the US dollar," said Mr Stephens Kimani a senior dealer at Co-operative Bank.
Due to the end of month dollar rush, trading on Monday started on a weak note as the local unit depreciated to the US dollar, with trading opening at Sh64.55 buying and Sh64.75 selling but by close of business the unit dipped to a further Sh65.30 buying and Sh65.40 selling.
Dealers said the dollar demand was backed by muted dollar inflows from agriculture and tourism in the market.
"The end month dollar demand surpassed the inflows and this saw the local unit lose ground to the US dollar," said Kimani.
Dealers said the unit would remain under pressure as there were no fundamentals to cushion the local unit.
"We expect the shilling to depreciate to trade in the range of Sh64.70 and Sh65.70," said Mr Kimani.
Dealers maintained that the skyrocketing oil prices and the importation of cereals into the country would also back the depreciation of the unit.
"The fact that we are importing cereals and oil at a high cost will also weigh down the local unit," said Mr Kimani.
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