Kenya shilling down amid fears of unrest
REUTER
NAIROBI, January 2: The Kenyan shilling weakened slightly on Friday as president Daniel Arap Moi moved close to victory in Kenya's chaotic and contested general election.Dealers said there was some demand for dollars from local corporates concerned about possible civil unrest after election results are announced. But they added that most market players were reacting calmly.By 4.30 pm local time (13.30 GMT) the shilling was trading at around 62.95/63.50 to the dollar, slightly weaker than its opening mid-rate of 63.07 and Wednesday's 62.67, dealers said. Moi, 73, who has been in power since 1973, was poised on Friday to win a final five-year term as a tally of unofficial counts placed him well ahead of the opposition. But opposition leaders have said they would not accept a result giving Moi victory and have warned of civil strife. "After the results are announced you might see a little bit more jitters," said one dealer at a leading international bank, adding that the Kenyan currency could pierce the
64 level to the dollar if protests turn violent. But dealers and analysts said Friday's fall in the shilling was exaggerated by thin trading conditions, and a dramatic further fall was unlikely. Most international investors pulled their money out of Kenya last year after the International Monetary Fund suspended its $205 million loan largely on the grounds of official corruption, analysts say. "Those that are left take the view that they are here to stay," said a currency strategist at another international bank. "We are not going to see any panic from short-term players overseas." Dealers said the shilling would continue to be influenced more by supply and demand from corporates than by speculation. Perversely, a calm post-election period could also undermine the shilling if importers release pent-up demand for dollars. Many of them held off from importing non-essential items ahead of the elections, fearing unrest. "If anything, you might see a slight weakening in the shilling through the month of
January as they (importers) come back in," said the currency strategist. The shilling went into a tailspin in August last year after the IMF suspended its lending, falling from around 55 to the dollar to over 70. Since then, however, it has clawed back some of those losses, even edging slightly higher in December as the election date approached.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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