NAIROBI, September 18 – The Shilling on Thursday hit one of the lowest levels seen this year, dropping to Sh74 against the US dollar. This level was last witnessed at the height of the post poll violence.
The local currency continued to weaken against its US counterpart as corporate demand and inter bank activity weighed it down and the market experienced a severe shortage of the green buck. The shilling opened the day at Sh72.75 buying and Sh72.85 selling but drifted to Sh74 before a market correction that saw the currency close Thursday straddling the Sh73 mark (Sh72.85 buying and Sh73.10 selling).
Co-operative Bank’s Treasury Senior dealer, Stephen Kimani told Capital Business that outlook for the local currency remained bearish as upheaval in international markets seeped into the local scene. “We expect the currency pair to remain volatile in the coming days with outlook for the shilling appearing even cloudier,” he added.
“The little foreign currency being injected into the market from the traditional earners such as agriculture is being wiped out by the country’s huge import bill. We are also still importing grain and fertilizer further depressing the local currency,” said Kimani.
The Sterling Pound traded at Sh123.75 against 123.95 while the Euro averaged 99.65 to 99.85. 100 Japanese Yen sold at 64.55 against 64.65.
The Dollar fell against the Euro and Yen in volatile trade Thursday, as losses in US investment banking stocks and doubts over the bailout of insurer American International Group (AIG) fuelled fears across the financial sector.
Shares of Morgan Stanley and larger rival Goldman Sachs plunged on Wednesday, and stock talk says Wall Street’s two surviving big investment banks may have to join up with a commercial bank to survive the intensifying credit contraction. Word in the market is that Morgan Stanley is holding preliminary takeover talks with Wachovia Corp.
In a separate report, Thursday, CNBC said Morgan Stanley was in talks with China’s CITIC while HSBC was also cited as a possible suitor for the number two US investment bank. Takeover reports also swirled over weakened top US savings bank Washing Mutual, major British mortgage lender HBOS and others.
Market players said growing worries about the dollar may have been more clearly reflected in a jump in gold prices, helping the Euro to rise against the US currency even as credit and economic concerns weighed it down.