Kenyan shilling weakens; Central bank weighs in on market divergence, say traders

NAIROBI: The Kenyan shilling weakened against the dollar on Wednesday and traders said the central bank had started holding meetings with banks to discuss the emergence of a dual foreign exchange rate system in the market.

There was no immediate comment from the central bank.

At 0830 GMT, commercial banks posted the shilling at 110.30/50 per dollar, its lowest level ever, slightly down from 110.20/40 the previous day.

The shilling has weakened significantly this year mainly due to concerns among traders about the impact of the coronavirus crisis on the tourism sector, a key source of hard currency.

This has led to the emergence of a dual rate system, with commercial banks trading the shilling at 113-115 per dollar, well above the central bank's official rate of 110, said Standard Bank in a research note issued on Monday.

Traders said the central bank had held a meeting with chief executive officers of commercial banks on Tuesday, and with key foreign currency traders on Wednesday, to discuss the issue.

It was also not immediately clear what the two meetings had resolved.