Implications of Strengthening Kenya Shilling

Kenya Shilling
The Kenya Shilling has been on an upward trend in recent past and this is attributed to the entry of foreign investors into the market that has rallied the Kenyan shilling to new highs.

New Highs
Yesterday, the shilling settled at one of its strongest positions to the dollar at a mean rate of Sh65.40, the strongest level since 1999.

Causes
The strengthening of the local currency against the US dollar was steered by increased foreign exchange inflows amid subdued demand from:
1.Foreign Investors rallying to invest at the NSE including top Wallstreet operatives.
2. Offer by Helios, an international investor, last week by buying a 24.99 per cent stake in Equity Bank worth over Sh11 billion.
3. This was followed by news that France Telecom would acquire a 51 per cent controlling stake of Telkom Kenya worth Sh26 billion.
4. Increased demand for the shilling from exporters to meet end month demands.
5. Increased tourist reception into the country with projections likely to go higher with the festive season approaching despite the impending electioneering period.
6. Strategic positioning by various players before the anticipated upcoming Safaricom IPO.
7.Other variables

Players in the forex market include:
-Interbanks
-Commercial companies
-Central Banks
-Hedge funds
-Retail and forex brokers
-Investment management companies

Effects
1. Exporters will face challenges of penetrating foreign markets as exports become expensive
2. There will be a significant reductions in local revenue terms for exporters.
3. Kenya will become expensive to trade with.
4. Net foreign exchange earnings will go down.