Commercial banks quoted the shilling at 93.45-55 this week, marking a low watermark not seen since November 2011.
“We are heading into dividend payment season for foreign shareholders,” Commercial Bank of Africa trader, Joshua Anene, explained to Reuters. “Also, the traditional sources of dollar inflows – tourism and (horticulture) – have dried up.”
Poor rainfall has impacted heavily upon the agricultural sector, hampering productivity and compressing earnings, particularly with regard to the tea, coffee and maize crops.
Farming is the most important economic activity in Kenya, where around 80 per cent of the workforce is employed in the agriculture and food processing industries, and tea and coffee exports are two of the leading foreign currency earners.
Companies are now preparing to buy US dollars in order to pay dividends to their foreign shareholders, and some traders suspect the central bank will be forced to sell dollars if the shilling continues to fall.
In an attempt to reassure the market this week, the central bank released a statement saying, “The bank has adequate foreign exchange reserves in excess of 4.5 months of imports to cushion the exchange rate against these short-term shocks and volatility.”