US dollar bills The Central Bank Kenya (CBK) dollar reserves declined by Ksh.8 billion in the week as the shilling swung back against the U.S. dollar from a historical low on Wednesday.
The shrinking of the reserves is an indicator of dollar selling by the CBK to smoothen out volatility in the local unit which was under pressure at the start of the week.
The Kenya shilling closed Friday’s trading at Ksh.108 gaining 0.5 percent from its Ksh.108.57 on Wednesday- its lowest close in history.
Combined market liquidity and dollar demand from importers and companies paying out dividends to foreign investors had seen the local unit face pressure with the shilling treading close to the Ksh.109 mark.
The official reserves however remain largely unchanged at Ksh.993.6 billion ($9.175 billion) or an equivalent 5.57 months of import cover.
CBK utilizes the foreign currency reserves on a number of occasions including stemming volatility in the shilling and foreign debt redemption.
The local unit is expected to remain under pressure from dividend payments and dollar demand from importers which re-occurs at the end of the month.
Safaricom for instance is expected to pay its final Ksh.1.40 dividend per share on August 31. The telco operator has an 11.2 percent foreign share ownership as per the latest industry statistics from the Capital Markets Authority.
Additionally, debt redemptions at the end of the month will shape the stock of dollar reserves. The government is expected to offset payments totalling Ksh.12.3 billion in August including Ksh.9.1 billion in interest.
During the week, the reserve bank had stepped back from shilling mop-ups through repurchasing agreements having only come into the market on Tuesday and Friday.
CBK however marked a windfall in its reduction of money in supply has it tapped Ksh.78.6 billion through an infrastructure bond auction on Wednesday.Video Of The Day: | BULLDOZERS FOR SANITIZERS | Families remain in the cold after evictions from Kariobangi sewage estate