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The Kenyan shilling Thursday lost ground to US dollar due to merchandise and oil importers buying dollars to meet their end-month obligations.
The Kenyan Shilling which opened trading at 101.2167 against US dollar could remain under pressure today as well because of increased demand for dollars which happens ordinarily towards the end of the month.
With the interest rate cap and the low inflation figures witnessed this week, the basket has pursued a low interest regime since the start of the year to ensure that the National Treasury and other agencies borrow cheaply in the domestic market but this may have come at a cost. This has attracted dollar investment inflow into the country something that is now hurting the demand for the shilling. Monetary theory tells us that funds flow to where there is higher interest.
Consumer Price Indices (CPI) figures by Kenya National Bureau of Statistics rose by 1.60 per cent from 195.78 in February 2019 to 198.91 in March 2019, while the overall year on year inflation in March 2019 stood at 4.35 per cent. The annual inflation rate in Kenya fell to 4.70 percent in January 2019 from 5.71 percent in the prior month and below market expectations of 5 percent.