The Central Bank of Kenya (CBK) has been actively selling US dollars in an effort to stabilize the Kenyan shilling and prevent its further depreciation.
This measure is part of the bank’s monetary policy interventions aimed at addressing the challenges posed by external economic pressures, including rising import costs and fluctuating global market conditions.
The Kenyan shilling was unchanged on Wednesday, November 27, with some dollar sales by the CBK helping to match importer demand, one trader said as reported by Reuters…
The shilling traded at 129.00/130.00 according to London Stock Exchange Group (LSEG) data, the same as Tuesday’s closing rate.
CBK on Kenyan Shilling Stabilizing
In the week ending November 21, CBK said the shilling exchanged at Ksh129.52 per US dollar up from Ksh 129.35 in the week ending November 14.
“The central bank selling dollars this and last week has helped hold the shilling at its current level,” the trader said as quoted by Reuters.
“We’ve seen the regulator coming to intervene in the market, and that has cured all the demand that was pending.”
Also Read: CBK Gives Update on Banknotes with 4 New Features
According to CBK, it only intervenes to smooth out volatility in the foreign exchange market in either direction and has no preferred level for the shilling.
Remittances Meet Importer FX Demand
Remittance inflows in September 2024 totalled USD 418.5 million (Ksh54.1 billion) compared to USD 340.4 million (Ksh40 billion) in September 2023, an increase of 22.9 percent.
Additionally, the cumulative inflows for the 12 months to September 2024 increased by 14.0 percent to USD 4,723 million compared to USD 4,142 million in a similar period in 2023.
CBK explained that the remittance inflows continue to support the current account and the foreign exchange market.
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The US remains the largest source of remittances to Kenya, accounting for 55.4 percent in September 2024.
The usable foreign exchange reserves remained adequate at USD 9,144 million (4.7 months of import cover) as of
November 21.
This met the bank’s statutory requirement to endeavour to maintain at least 4 months of import cover.
Also Read: CBK Explains Oil Price Hike Despite Stable Shilling & Increased Foreign Remittances
Global Inflation
Inflation in advanced economies showed mixed trends during the week ending November 21, 2024.
Inflation in the United Kingdom increased to 2.3 percent in October from 1.7 percent in September, while Japan’s inflation eased to 2.3 percent in October from 2.5 percent in September.
The US dollar index remained stable against a basket of major currencies during the week ending November 21, 2024.
International oil prices increased during the week ending November 21, driven by heightened tensions between Russia and Ukraine.
The price of Murban oil increased to USD 75.56 on November 21, 2024, from USD 73.87 on November 14, 2024.
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