Market News

Forex reserves in partial recovery after Sh30bn fall

The Central Bank of Kenya (CBK) building in
The Central Bank of Kenya (CBK) building in Nairobi. FILE PHOTO | NMG 

Official foreign exchange reserves kept by the Central Bank of Kenya (CBK) jumped Sh19 billion last week after a Sh30 billion drop the previous week.

The reserves are still down by Sh11 billion compared to two weeks ago even as the local currency appreciated to its highest level against the dollar since May 22.

The forex stood at $8.855 billion (Sh893.2 billion) from $8.666 billion (Sh872.8 billion) in the previous week and $8.958 billion (Sh902.2 billion) two weeks ago.

For last week it amounted to a change of $189 million while in the previous week it was a fall of $292 million (Sh30 billion). This reduced the import cover to 5.92 months compared to 5.99 months two weeks ago.

According to the CBK, the local unit hit a mean of 100.725 to the greenback at its highest, which happened on Wednesday last week. On May 22, the unit stood at 100.60 to the dollar.

The shilling has lately been a beneficiary of an improvement in the current account deficit as well as the overall balance of payment position. The improvement is linked to the surge in the amount of remittances as well as the raising of Sh200 billion in a Eurobond in international markets.

The momentum the currency gained from Wednesday emanated from dollar inflows from corporate players to the extent that the currency at one time touched a high of 99.80 units, an analysis by Commercial Bank of Africa showed last week.

“The Kenya shilling edged higher against the US dollar in Wednesday’s session, closing the day at the lower bounds of the 99.80-101.90 trough. The home unit was on a bullish trajectory in early trading as dollar inflows from corporate players inundated the market,” said CBA.

In its analysis of last week’s trading, CBA said that the shilling weakened slightly because dollar buyers took advantage of the low levels to accumulate the foreign currency.

“An uptick in foreign currency demand saw the shilling end the week marginally weaker against the US dollar. … Corporate sector dollar buyers later took advantage of the low levels, pushing the shilling a tad lower by the closing bell,” said CBA.