Shilling gains further against US dollar
Jul 01, 2007
THE shilling touched the 1,575 mark against the dollar during the week, supported by end-of-month inflows from agencies and muted corporate activity, dealers said.
By Sylvia Juuko
THE shilling touched the 1,575 mark against the dollar during the week, supported by end-of-month inflows from agencies and muted corporate activity, dealers said.
They predicted that the shilling would maintain its rally this week.
The local unit was trading at 1,585/1,595 to the dollar in the inter-bank market on Friday, compared to 1,1,614/1,619, the previous week.
“The shilling has maintained its rally mainly on the back of strong end-of-month inflows from mainly non-governmental organisations and the export sector,†said a dealer.
Traders said the shilling oscillated in wide ranges on Thursday to touch 1,585/1,595 per dollar from opening levels of 1,602/1,612.
Economists said the strong shilling, driven by market fundamentals, has continued to worry exporters who argue that it makes the sector uncompetitive.
“If the fundamentals are strong, you cannot expect the central bank to come in and shore up the shilling because it is driven by supply and demand.
“The central bank will only intervene to smoothen out volatility in the market,†said Marios Obwona, a principle researcher at the Makerere University Economic Policy Research Centre.
“The market is awash with dollars following improved trade with southern Sudan and eastern Congo and good performance of exports. You cannot stop the dollars from coming in,†he said.
However, while exporters were hurting because for every dollar earned, they get fewer shillings, importers are laughing all the way to the bank.
Economists said the local unit’s appreciation was also triggered by improved terms of trade, expectations of the Commonwealth Heads of Governement Meeting investment inflows, increased offshore inflows and improved workers’ remittances. Remittances are estimated to reach $1b this year.
THE shilling touched the 1,575 mark against the dollar during the week, supported by end-of-month inflows from agencies and muted corporate activity, dealers said.
They predicted that the shilling would maintain its rally this week.
The local unit was trading at 1,585/1,595 to the dollar in the inter-bank market on Friday, compared to 1,1,614/1,619, the previous week.
“The shilling has maintained its rally mainly on the back of strong end-of-month inflows from mainly non-governmental organisations and the export sector,†said a dealer.
Traders said the shilling oscillated in wide ranges on Thursday to touch 1,585/1,595 per dollar from opening levels of 1,602/1,612.
Economists said the strong shilling, driven by market fundamentals, has continued to worry exporters who argue that it makes the sector uncompetitive.
“If the fundamentals are strong, you cannot expect the central bank to come in and shore up the shilling because it is driven by supply and demand.
“The central bank will only intervene to smoothen out volatility in the market,†said Marios Obwona, a principle researcher at the Makerere University Economic Policy Research Centre.
“The market is awash with dollars following improved trade with southern Sudan and eastern Congo and good performance of exports. You cannot stop the dollars from coming in,†he said.
However, while exporters were hurting because for every dollar earned, they get fewer shillings, importers are laughing all the way to the bank.
Economists said the local unit’s appreciation was also triggered by improved terms of trade, expectations of the Commonwealth Heads of Governement Meeting investment inflows, increased offshore inflows and improved workers’ remittances. Remittances are estimated to reach $1b this year.