The shilling-dollar exchange rate Friday continued to edge towards 103 after the Central Bank of Kenya on Thursday said it was closely monitoring the currency.Forex dealers began the day at a higher rate, exchanging the shilling at 102.75 against the greenback, compared with last evening’s 102.40.
CBK Governor Patrick Njoroge said the shilling, which had suffered from both external and internal pressures, was closely being monitored to arrest the fall.
“The Kenya shilling has weakened steadily against the US dollar in the recent months and the foreign exchange market has been volatile over the last week.
“Current global risks have also dampened investor sentiments. Domestic factors have compounded these external pressures, such as US dollar requirements arising from large corporate deals, temporary liquidity surge in the banking system and the widening external current account deficit (in part due to imports of capital goods and other lower than expected earnings from the traditional exports) among others,” Mr Njoroge said.
Fed chairman Janet Yellen has insisted that the US will start raising interest rates later this year despite calls by the IMF to have it wait till next year.
The new slide now portrays a defiant currency that has failed to respond to various measures, including the sale of dollars to commercial banks and tightened monetary policies.
For eleven days in a row, the shilling has stayed above the 100 mark, with Monday recording the lowest after forex dealers quoted 103.35 to the greenback.
The CBK says the dollar continues to strengthen and has affected most currencies, translating into the weakening of emerging-market currencies.
The regulator is optimistic that the shilling will relax against the backdrop of a positive outlook by the private sector and improved confidence in the economy on the back of an improved positioning of Kenya on the global stage.
“The CBK stands ready to enhance its open market operations and other measures including intervening through the direct sales of US dollars to commercial banks to stem the sharp depreciation of the Kenya shilling. The CBK foreign exchange reserves remain adequate to stabilise the exchange rate against these short-term shocks,” Mr Njoroge said in the evening press release.
Mr Njoroge had earlier said the currency should be left to assume its true value, but with the mix of factors at play, it may be hard to immediately establish the true exchange rate of the shilling.
Traders reported heavy sales of US dollars by the CBK across the week in a measure that has marginally helped to restrain further depreciation but failed to reverse the worrying rates.