The Central Bank of Kenya (CBK) moved in to purchase dollars after Kenyans began selling them for the shilling which has witnessed a meteoric rise in the last 12 days.
A report by Reuters on Thursday indicated that CBK purchased the dollars to curb volatility likely to arise as a result of the sudden growth.
According to reports, the shilling dropped by 3 per cent from Ksh150 on Wednesday to Ksh145.00/Ksh146.00, with strong bids that would have pushed the trading to Ksh139.
"The Central Bank showed up to buy, so I think they don't want too much volatility," a trader told the outlet.
"If they hadn't come in we would probably be looking at levels of maybe 130 because everybody knows offshore inflows are coming."
International media outlets, earlier Thursday morning, reported that Kenyan investors were actively selling their dollars speculating on a greenback shortage after the government moved to buy back the Ksh316 billion (USD2 billion).
Earlier, Treasury Principal Secretary Chris Kiptoo had warned individuals hoarding dollars that they risked making losses given the trajectory of the strengthening shilling.
"I want to encourage Kenyans that the risk of failure to settle for the Eurobond is gone. Sell your dollars and get back to business. Don't do any speculation anymore,” Kiptoo advised.
"The issue has been addressed. There is now confidence and you can tell the shilling is beginning to improve. As of this morning, I was told it was trading at 151 units and yesterday it was at 157, and previously it was at 160 and that is very good news."
President William Ruto's economic adviser David Ndii agreed with the observation noting that individuals had tried to hoard dollars speculating that the state could have defaulted on its earlier Eurobond.
"Markets have opened. Eurobond default risk has evaporated. Speculative dollar positions unwinding. That popping sound you hear is Azimio bubble bursting," stated Ndii.
The recently floated Eurobond worth Ksh234 billion (USD1.5 billion) has attracted more than USD6 billion in offers, improving investors’ confidence in Kenya’s economic and debt management strategies.
Speculations were rife that the Eurobond is expected to help pay for the maturing one.
