CBK Governor Patrick Njoroge links some shillings problems to malicious actors

CBK Governor Patrick Njoroge (PHOTO; YouTube)

Some of the Kenyan shilling’s recent weakening was caused by market misunderstanding of the central bank’s plan to boost its reserved by buying dollars from the market, and some “malicious actors”, the central bank governor said on Tuesday.

The shilling is hovering close to its record low of 106.70 per dollar, mainly due to the strengthening of the dollar and concerns about the impact of the coronavirus on Kenya’s export earnings.

The bank in March said it will buy 100 million US dollar a month between March and June to increase reserves and will also purchase a minimum $1 million from banks at prevailing rates in each deal.

The bank has bought dollars in the past through open market operations, but it does not usually disclose the target amount or any other details.

New developments across the globe, including a significant drop in oil prices, have opened a window for a more formal dollar purchase programme, the Central Bank of Kenya (CBK) said in a statement seen by Reuters.

“This would bolster CBK’s preparedness to deal with heightened global volatility and uncertainties,” it added.

Traders reacted angrily to the move, saying the central bank’s intervention could distort the foreign exchange market, due to the anticipated spike in demand for dollars.

“They should have bought dollars discreetly,” said a market participant who did not wish to be named.