Presence of the Central Bank of Kenya (CBK) in the currency market for the past one year has been keeping the shilling weak. Treasury dealers at the Bank of Africa (BoA) say that the sharp depreciation of the shilling has given CBK control over movements of the shilling.
“We see the buying of forex by the Central Bank in the market as the reason for the shilling being slightly weaker than it should be. We probably would be trending around Sh81 to the dollar by now if the CBK was not in the market,” said Philip Wambua, the head of treasury at Bank of Africa. (As quoted by Business Daily Africa)
Central Bank of Kenya has accumulated close to Sh10 billion ($120 million) of foreign currency in the past two weeks, helping to shore up the national forex reserves.
According to Mr Wambua, the main weaknesses that resulted to the downfall of the local unit in the latter months of 2011 had been there for more than two years . The case is that the change had not been rapid before October
BoA said the Central Bank’s tight monetary policy stance and the inflow of forex through the local fixed-income markets would keep the shilling within the current exchange bands, but its longer-term stability remained precarious.
The Kenyan Unit fell rapidly in the month of October and hit a record low of 107 to the American currency.