In yesterday’s trading the Kenya Shilling strengthened for the first time in three days registering an exchange rate of KES 84.90 over the course of the day. This comes as a small reprieve from the depreciation we have observed on the shilling over the last week or so. In response to this the Central Bank of Kenya (CBK) intervened by selling dollars in the market to mop up excess liquidity and increase the foreign currency available in the economy.
This momentary appreciation could be attributed to the increase observed on coffee and tea prices leading to a higher inflow of dollars- an increase in the foreign currency available in the economy.
According to Reuters, coffee prices climbed 2.7% at an auction on Tuesday to about KES 14,842.8 per 50 kilogram bag. Tea prices rose to an average of approximately KES 240.24 per kilogram at a weekly auction in Mombasa, from KES 236.88 per kilogram a week earlier. The appreciation of the Kenya shilling is then due to these increases as the foreign currency inflows caused by this were above par.
According to the Central Bank of Kenya’s website, the indicative exchange rates for today indicate that the Kenya Shilling will be trading at KES 85.1625 against the US Dollar. This is lower than the level recorded the day before. It thus seems that the increased observed over the course of the day was offset and overshadowed by other factors causing the shilling to close at levels lower than it did on Tuesday.