Peak global oil prices to hit shilling

Last week for instance, Murban- the crude type from which Kenya derives its petroleum products from hit the $90 (Ksh.10,224) mark per barrel signalling costlier fuel imports in coming months.

Muammar Ismaily the Vice President and Research Analyst at EFG Hermes Kenya expects the shilling to slide further with the peak global oil prices compounding the effects as the local unit comes under more pressure including the normalization of monetary policy in advanced markets.

“Given recent increases in the global oil price, the USD Federal Reserve’s intention to stop its Quantitative Easing (QE) program in March and the positive risk of a drought, the shilling could depreciate further,” he said.

Analysts at AIB-AXYS Africa hold a similar view even as they expect receipts from diaspora remittances to offset some of the pressure on the local unit.

“We expect the local currency to remain under pressure due to continued gains by the US dollar against other major global currencies and reduced dollar inflow from key export earning sectors such as agriculture,” the analysts stated in a fixed income note published on Monday.

Global oil prices are expected to continue the march towards $100/barrel on reduced output by oil exporting countries amidst bubbling geo-political challenges.

The Central Bank of Kenya (CBK) has continued to describe the local currency unit as stable having exchanged at Ksh.113.60 for the US dollar on Friday.

The shilling which shed 3.6 per cent of its value against the green buck in 2021 has shed about 0.6 per cent of its value in the year so far.

The local unit was quoted at Ksh.113.62 against the US dollar in early morning trading on Monday.