The election of Donald Trump may portend good news for the Kenya shilling in the long run despite the uncertainty around his presidency.

After the announcement of Trump as the President-elect yesterday, the shilling held firm, with Bloomberg tracker quoting the local currency at 101.50 against the dollar, compared with Tuesday’s close of 101.70/80.

Analysts said Trump’s election signals the Federal Reserve (the Fed) - the US Central Bank - may hold interest rates in December, which might prove a boon for the shilling.

This is good news for the local currency because the impact of a rate hike in the US on emerging markets would include huge capital outflows as money trickles back to the stable economy and the dollar strengthens further.

A stronger dollar does not not sit well with importers as they are forced to pass the extra cost of imports such as motor vehicles and food stuff to consumers.

Analysts point out that Trump’s victory comes with a lot of uncertainties and is likely to be followed by market volatility that could decrease the likelihood of a Fed rate hike by 25 basis points in December.

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Last December, the shilling withstood pressure, losing marginally by 0.09 per cent to close at 102.4 against the greenback when the Fed raised rates from 0.25 per cent to 0.5 per cent, increasing the cost of lending for the first time in nine years.

RISK CURRENCY

“The Kenyan shilling is a risk currency so I do not see it moving significantly from the market spooks like the Euro and the pound. The upside for me is that the Fed may not raise the rate until 2017 when the anxiety subsides,” Stanbic Bank Regional Economist Jibran Qureishi said.

Yesterday morning, Reuters reported the shilling remained firm, steadied by Central Bank advice to dealers that it would offer support to the local currency after gyrations in other world currencies following Trump’s win.

CBK gave a similar assurance five months ago when Britain voted to leave the European Union and intervened in the market to shore up the shilling against turmoil in the international markets.

Qureishi, however, says the Central Bank has already been active in the past three weeks, supporting the shilling against pressure from the dollar’s resurgence.

“Central Bank has been in the market spending $50 million to $60 million a week in the past two to three weeks so the intervention would not be new,” he said. Yesterday, the Shilling closed the day at 101.6 to the US dollar.