CBK buys dollars to curb shilling volatility
By Noel.Wandera, February 16, 2024
Central Bank of Kenya has stepped in to curb exchange rate volatility by buying US dollars, even as the Kenyan currency continued rallying yesterday.
The CBK’s intervention aims at smoothing out volatility when the shilling is moving too fast in either direction.
By yesterday, it was up almost 8 per cent, bidding as strong as 139 to the US dollar, a rally that was fueled by foreign inflows into the domestic debt and the resolution of a $2 billion (Sh321 billion) Eurobond that matures in June 2024.
Afternoon trading
However, the local currency gave up some of its gains in afternoon trading after CBK stepped in, according to Foreign Exchange traders. By midday, commercial banks quoted the shilling at Sh145/146 to the US dollar, up more than 3 per cent on Wednesday’s closing rate of Sh150/151.
The CBK intervention sends a strong signal that they want the currency to stabilise and that any changes should be gradual. The regulator only intervenes when it deems necessary and does not have a preferred level for the currency.
Early this month, Central Bank of Kenya (CBK) reaffirmed government’s commitment to a market-determined exchange rate, with a readiness to intervene during periods of high volatility.
Governor Kamau Thugge (pictured) acknowledged that the exchange rate had exceeded the equilibrium rate, suggesting a possible regulatory intervention.