THE shilling continues to fall as the demand for US dollars outweighs foreign exchange inflows, thus, driving the local currency further south.
With countries increasingly easing social restrictions, there are likely to be more twists in the forex business.
The shilling fall comes at the closing of the month when the currency actually is thought to appreciate as players are meeting their end month tax and other payment obligations.
The shilling fell 0.15 per to 2,303/23 since the beginning of the year, though the depreciation level is, at the moment, still insignificant.
NMB Bank said in its daily e-Market report on Wednesday that the market continues to see an increase of forex though not sufficient to offset demand from importers.
“We continue to see dollar inflows from mining, agri-export and NGOs but they are outweighed by the outstanding demand from oil and manufacturing importers,” NMB said.
On a weekly basis, Interbank Foreign Exchange Market (IFEM), the shilling has maintained slight depreciation similar to past weeks.
Orbit Securities said the shilling lost 11 points in percentages (pips) to close the week ending last Friday at a weighted exchange rate of 2,303/09 against the US dollar.
“As lockdowns are being lifted in different countries as they attempt to revamp economic activities, as well as recommence of tourism activities domestically, inflows are looking to boost the shilling from the current trajectory,” Orbit said in its weekly synopsis.
However, the shilling, since the outbreak of Covid 19, maintained constant depreciation for ten weeks in a row, albeit insignificant, as the results from stressed inflows especially from a halt of tourism activities.
Tourism, one of the major sectors contributing to foreign exchange, received a beat from coronavirus pandemic and expected to affect the inflows.
The Ministry of Tourism and Natural Resources estimated that the number of tourists in this season that kicks off next month to reach 1.9 million.
But, due to the coronavirus pandemic the ministry said in its 2020/21 budget the number may decline by 76 per cent to 437,000.
The government, nevertheless, has opened the sky to enable in and outbound flights to operate in the country from yesterday and tourists are not subjected to 14-day quarantine.
The drop in number of incoming tourists is projected to shrink the sector earnings from 2.6 billion US dollars to 598 million US dollars.
Tourism is the country’s second foreign exchange earner, raking in 2.5 billion US dollars last year compared to gold which topped the list with 2.7 billion US dollars.