The Kenya Shilling remained weaker as Central Bank of Kenya(CBK) moved to stabilize the currency.
The currency of East Africa’s largest economy fell to 113.61 against the US Dollar this Monday, the weakest on record, before clawing back the depreciation to 113.49, according to data compiled by Bloomberg
The CBK offered KSh 10 billion of seven-day term-auction deposits this Monday to support the local unit, after staying out of the market for days.
“The currency will remain under pressure due to bets on the dollar continuing to gain, reduced inflows from exports, and elevated global oil prices, Nairobi-based AIB-AXYS Africa said in a weekly note.
Kenya’s shilling has come under pressure as the dollar strengthens, with investors anticipating the Federal Reserve increasing interest rates.
The Bloomberg Dollar Spot Index, which tracks the performance of a basket of 10 leading global currencies versus the U.S. dollar, gained.
The dollar “strengthening has received legs this year,” Churchill Ogutu, an economist at ICEA Asset Managers, said on Monday.
Recent economic data releases “have teed up the odds of a rate hike as early as end this quarter, which has bolstered USD strength against other currencies,” he said.
According to data analysis from AIB-AXYS Africa, the Kenya Shilling continued its loosing streak in December, losing 0.58% against the greenback.
Kenya Shilling Exchange Rate against the Greenback in December 2021
On the 31st December, the Kenya Shilling closed at a value of 113.14/$ versus the 112.49/$ witnessed at the end of November.
The Shilling is likely to remain under pressure mainly due to dollar demand from the
import bill as oil prices remain elevated outweighing supply from key export
CBK’s usable foreign exchange reserve increased to US$ 8,817 million in December from US$ 8,773 million at the end of November, representing an increase to 5.39 months of import cover from 5.36 months of import cover.
The reserves are still sufficient as they remain above the CBK’s statutory requirements of four months of import cover.
The latest weekly bulletin from the CBK shows that the Kenya Shilling exchanged at 113.33 per US dollar on January 13, compared to 113.19 per US dollar on January 6, 2022.