Official foreign exchange reserves have fallen by Sh15.7 billion to Sh874.5 billion ($8.69 billion) in the past one month, pushing down the country’s import cover.
Data from the Central Bank of Kenya’s (CBK) weekly bulletin indicated that the reserves had been whittled down from Sh890.27 billion ($8.83 billion). The import cover stood at 5.78 months compared to 5.88 months on July 26.
Traders have said that the fall is indicative of some CBK selling activity in the open market to prevent exchange rate volatility, although the regulator may have also used the dollars to settle Kenya’s foreign debt obligations.
Despite the change of the reserves, the Kenyan currency remains range-bound against the dollar. The shilling has been trading at a daily mean of between 100.34 to 100.89 units to the greenback – within a range of 55 units.
But the shilling has in the past few days showed some tendency to weaken due to end of month dollar demand from importers.
The CBK showed that the average exchange rate for the shilling was 100.79 last week compared to 100.62 in the previous week, a depreciation by 17 units. Overall, however, the CBK considered the shilling stable, saying the forces of demand and supply were basically balanced in the interbank currency market.
“The Kenya shilling remained relatively stable against major international and regional currencies during the week ending August 23, 2018.
The stability of the shilling against the US Dollar reflected balanced demand and supply in the interbank market,” said the CBK.
Throughout the month traders in the currency market reported the CBK either intervening or letting the market finding its balance. The stability was maintained also despite the Treasury reporting that the current account deficit had widened by an extra Sh6.8 billion to stand at Sh485.45 billion as at the end of June.