The Kenyan Shilling remained steady against the United States Dollar on Friday, days after the Central Bank cut its base lending rate by 75 basis points to 12.00 per cent.
As of Friday, October 11, the London Stock Exchange Group (LSEG) quoted the Kenyan Shilling trading at 128.50 against the US Dollar.
According to analysts who spoke to Reuters, the local currency was expected to retain its levels for the next week. "It's just been stuck around the same levels," said a trader who spoke to the publication.
The Shilling’s stability has in recent weeks been boosted majorly by dollar inflows from diaspora remittances and tea exports. An increase in the dollar inflow has significantly improved the country’s forex reserves which currently stand at $8.2 billion.
The local currency’s stability has also been attributed to the Central Bank’s decision to intervene in the exchange rates. While speaking recently at a Monetary Policy Meeting, CBK Governor Kamau Thugge noted that the regulator intervened to reduce the local unit’s volatility.
“Our policy is to allow the exchange rate to be determined by forces of supply and demand, however, we do intervene basically to moderate excessive fluctuations in the exchange rates,” Thugge noted.
“That is part of our role and business and the same can be said when there is a need to intervene when the exchange rate begins to weaken,” he added.
According to a report by the Central Bank, the Kenyan Shilling has retained its position as the best-performing currency globally, gaining by 17 per cent since February this year.
In its report, the Central Bank attributed the Shilling's resurgence to the government's decision to buy back the Ksh310 billion Eurobond which matured in June this year.
CBK Governor Kamau Thugge in a recent interview with Global Finance noted that external debt refinancing following the liability management operation and subsequent repayment of the remainder of the Eurobond in June completely changed investor sentiment.
"This, coupled with monetary policy actions, led to the resumption of net forex inflows into the Kenyan economy. The change in sentiment and improved foreign investor confidence immediately impacted the Shilling," Thugge said.
The local currency has in recent months overcome several hurdles that threatened its stability including the anti-government protests that took place in June and the decision by Moody's Credit Ratings Agency to downgrade Kenya.
