Banks Hike Dollar Rates to Match Demand

In Kenyan banking halls, retail dollar buyers are currently paying up to Sh130 per unit, highlighting the significant difference between the official printed rate and the market rate for customers.

The price of the dollar is currently between Sh130 and Sh131 per unit, with several major banks buying the same currency at between Sh117 and Sh119. According to bankers, this is due to increased demand and the higher cost of accessing the hard currency on their end.

On Monday, the Central Bank of Kenya’s (CBK) published official shilling-to-dollar exchange rate was 121.33 units. Due to the high demand for US dollars, the shilling has lost 6.8% of its value against the dollar since the year’s beginning.

Yesterday, Equity Bank and I&M Bank respectively quoted the selling and buying prices for the dollar at Sh130.35 and Sh130.75 per unit.

According to prices displayed in its banking halls, Co-operative Bank was buying US currency at Sh117.15 per unit and selling it for Sh131.40.

Importers have been emphasizing the higher effective rate for those purchasing dollars on the open market for months. Banks’ reluctance to sell to one another has made it challenging for some to obtain dollars, which makes it challenging for smaller players to fulfill client orders.

There is a shortage of US dollars as a result of the exchange rate market’s volatility, which has slowed dollar trading between lenders and interbank transactions.

“The foreign exchange market is a matter of demand and supply. Some customers are only willing to sell you dollars at a higher rate than the published mean rates. You then add a margin to that,” said a bank executive.

Manufacturers had earlier this year complained that a dollar shortage was causing them to pay more for dollars than the CBK’s official average exchange rate.

The regulator, however, denied that a parallel exchange rate might emerge in the nation, claiming that there are enough dollars available on the market to satisfy corporate and importer demand.

The scramble for the dollar means that buyers  both for trading and hedging purposes  keep bidding higher for the currency.

Official data on forex holdings by the private sector in local banks have backed the claims that clients are holding onto their dollar stocks tightly.

By the end of July, foreign deposits in local bans stood at the equivalent of a record Sh905 billion, pointing to market distribution inefficiencies and hoarding rather than an outright shortage of forex in the country.