CBK pledges to stop fall of the shilling

The shilling is expected to depreciate against the US dollar this year, according to a new survey by the Central Bank of Kenya (CBK).

The regulator has promised to intervene to cushion the local currency against sudden moves, although Governor Patrick Njoroge clarified on Tuesday they would not defend a specific rate.

“From the monthly Market Perception Survey, we noted that the exchange rate is expected to weaken,” said the CBK boss during a press briefing in his office.

Influence rate

On Tuesday, commercial banks were quoting the shilling at 103.95/104.05 per dollar. Dr Njoroge, however, warned forex traders against speculating to try and influence the rate.

“The general sense is that it will weaken. What we do not ask them is by how much. And the moment they begin talking how much, of course we will want to talk models. Fortunately, they do not let me discuss these things,” he said.

The governor said the regulator was committed to a market-driven rate and would only act to stop volatility.

“We have a flexible exchange rate regime, so we do not defend or target any one rate. The only thing that concerns us is volatility. When the exchange rate is appreciating quite quickly, we can intervene to buy dollars and when the exchange rate is appreciating very quickly, we can intervene by selling dollars to reduce the pace,” he said.

At the beginning of this year, the shilling drastically dipped from 100 to the dollar to 103 in a matter of days.

CBK has largely managed to maintain stability of the forex market since 2015 September when it hit 106 against the greenback, the lowest point in Njoroge’s regime.