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Capital Markets

Forex reserves jump Sh6.5bn to stem slide

forex bureau
Customers at a forex bureau in Nairobi. FILE PHOTO | NMG 

Foreign exchange reserves increased by Sh6.5 billion ($64 million) in the week ending January 17 to $8.047 billion (Sh818.38 billion), reversing a generally declining trend registered in recent weeks.

The import cover was 5.27 months, still within the legal minimum of four months but lower than last year’s peak of 6.36 months.

The current forex level is also above 4.5 months of cover, a requirement under East African Convergence Criteria.

The cover provided a comfort zone for the Kenyan shilling with analysts saying it was one of the factors contributing to the strong run of the currency since the year began and in the near future.

“The shilling has appreciated against the US Dollar by 0.1 percent year-to-date and in our view the shilling should remain relatively stable to the dollar in the short term, supported by [among other factors high levels of forex reserves, currently at $8.0 billion, equivalent to 5.2-months of import cover,” said Cytonn Investments.

“[This is] compared to the one-year average of 5.1 months and above the EAC region’s convergence criteria of 4.5 months of imports cover.”

The shilling has gone below 102 to the dollar this year (at 101.7 as of opening of markets on January 21), having been at 103 and 102 units for most of last year.

The stability of the currency for the better part of the last 12 months is also a result of the significant $2 billion received after the country raised it in a Eurobond offer towards the first quarter of last year.

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