Wealthy Kenyans deposited a record Sh45.5 billion in dollars between March and May this year, according to latest data by Central Bank of Kenya (CBK).
CBK data shows Forex reserves hit Sh671.4 billion in May, up from Sh625.9 billion in February—the largest ever three-month increase.
Interestingly, this happened in the period when Kenya imposed restrictions to contain the spread of Covid-19, indicating that rich individuals are protecting their value instead of finding new areas to invest their fortunes. It is worth noting that holding their money in dollars translates to higher value.
CBK learned through a poll that investors were hoarding dollars after forecasts that the shilling would remain weak against the US dollar, Business Daily reports.
The shilling has weakened from the mark of Sh101.87 per US dollar recorded in February to Sh107.29 on Wednesday.
“We expect USD to strengthen on the back of better-than-expected May labor report. Furthermore, the unresolved US-China trade spat signals a RISK-ON sentiment on the world reserve currency,” Genghis Capital said in its weekly commentary.
“People feel safer holding foreign currency instead of the shilling in this situation. This has been a key contributor to the rising stock of foreign currency deposits.”
“The dollar has been strengthening against all emerging market currencies and Kenya is not spared. Some of our main dollar inflows were hit quite hard over the last three months.”