NAIROBI: The Kenyan shilling bounced from near three-year lows on Thursday after the Central Bank of Kenya (CBK) sold an unspecified amount of dollars into the foreign exchange market, traders said.
However, traders said the shilling, which has lost 2.6 percent to the dollar so far this year, remained under pressure from importers seeking dollars and was likely to weaken again in the face of a shortage of hard currency inflows.
By 1100 GMT, commercial banks quoted the shilling at 88.85/89.05 to the dollar, a level it traded at last week. The shilling had earlier on Thursday hit a low of 89.45/89.55, a level it last reached in December 2011.
"The central bank came in and sold dollars, not sure how much, but it was big for this kind of recovery," said a trader at a leading commercial bank.
The local currency of East Africa's biggest economy had earlier weakened due to dollar demand from the oil and retail sectors, continuing a steady decline since last week under pressure from importers against scant hard currency inflows.
Traders had warned that the local currency would slide even further without central bank intervention.
In a separate statement, the central bank said it was able to cope with any shocks to the economy after accumulating foreign exchange reserves totalling $7.4 billion - worth 4.85 months of import cover - over the past three weeks.
Three weeks ago the bank had reserves worth $6.3 billion, enough to cover 4.13 months of imports. The bank said the additional $1.1 billion was from receipts of the sale of Kenya's maiden sovereign bond issued in June.
The bank said its level of foreign exchange reserves was "the largest that the CBK has ever attained", and were enough to meet any unforeseen market developments.
"This gives the Central Bank and the economy cushion to weather any shocks," the bank said.
Kenya's tea and tourism sectors, leading foreign exchange earners, have faced difficult times this year, causing a shortage of hard currency.
A global glut has hurt tea prices, while tourists have avoided the country because of frequent deadly attacks blamed on Islamists from neighbouring Somalia.
Comments
Comments are closed for this article.