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The Central Bank of Kenya (CBK) has attributed the ongoing slide of the Kenyan shilling to increased foreign payments by the private sector.
The attribution by CBK comes on the back of the shilling trade at a two-year low valuation against the US dollar even as the local unit takes a further hit from increased market liquidity.
The shilling traded at between Ksh.103.74 and Ksh.104.12 on Thursday before settling at a much improved Ksh.103.88 according to tracking by Bloomberg, having touched a low Ksh.104.02 at the close of trade on Wednesday.
Speaking at a post Monetary Policy Committee (MPC) news conference on Thursday, CBK Governor Patrick Njoroge attributed the continued erosion of the shilling’s value to one-off payments in foreign denominated currency, in a factor he says has piled the devaluation pressures.
The increased offshore payments have spelled doom for the shilling whose value continues to grapple with an expanded flow of money in supply over the last month.
While a sliding shilling has spooked hysteria from the investor community, the Central Bank has played down risks of volatility in expectations of a calm in foreign currency demand on one side.
At the same time, CBK has backed its stored firepower represented by a solid external payments account.
The narrowing of the current account deficit to 4.2 percent of GDP in 12 months to June 2019 from a higher 5.4 percent in May of 2018 has propped up the foreign exchange market to retain its relative stability.
The strengthened current account has seen the CBK usable foreign exchange reserves level up at Ksh.1 trillion for the third month running to represent an equivalent 6.2 months import cover.
CBK accepted offers worth Ksh.50.6 billion at a weighted average rate of 12.3 percent to leave Ksh.36.1 billion in excessive and bids on the table.
The regularly traded Ksh.24 billion worth t-bills were meanwhile 13.5 percent oversubscribed this week having attracted bids worth Ksh.27.2 billion with the short tenured 91 day paper representing the greatest attraction for the bond investors.
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