The foreign exchange reserves held by the Central Bank of Kenya increased last week to the highest levels in the last 9 months. An increase in foreign reserves, caused by the Central Bank buying foreign currency (usually the US dollar) using local currency has helped stabilise the shilling against the US dollar and other foreign currencies.
As stated in its weekly bulletin, the usable official foreign exchange reserves held by the Central Bank increased from $ 4.311 billion (equivalent to 3.80 months of imports) as at March 22nd 2012 to $ 4.365 billion (equivalent to 3.84 months of imports) in the week ending March 29th 2012.
By consistently increasing the foreign exchange reserves by buying dollars using the local currency, the Central Bank has, essentially, been increasing the money supply available in the economy and helped reduce inflation as has been witnessed over the last few months. To read more on the inflation reductions, click here.