Shilling gains on account of rate cap scrapping

The new look Kenyan currency notes. The shilling continues to benefit from increased dollar inflows to the securities market and earnings by exporters.

According to the Central Bank of Kenya, commercial banks quoted the shilling at an average of 102.50 against the dollar yesterday, compared to a closing average of 102.81 on November 8 (Friday) having hit the 102 mark on November 7 at 102.95.

“The Kenya shilling remained stable against major international and regional currencies during the week ending November 7. It exchanged at Sh102.95 per dollar on November 7, compared to Sh103.21 on October 31. Significant inflows were received from exporters during the week,” says the CBK weekly bulletin.

Foreign exchange reserves remained stable at Sh914.53 billion ($8931 million), 5.58 months of import cover as at the end of the week, from Sh917.61 billion ($8961 million) the previous week.

According to Reuters, the shilling hit a four-month high on Monday buoyed by dollar inflows from remittances and offshore investors buying shares at the Nairobi Securities Exchange.

Report of plans to repeal the interest rate cap in early October led to increased activity among listed banks at the NSE and subsequent increase in dollar flows.

Share prices for NCBA Group, Equity Group and KCB Group increased by 30.7 per cent, 24.2 per cent and 23.2 per cent respectively.

Market capitalisation, equity turnover and total shares traded increased by 3.7 per cent, 27.4 per cent and 35.7 per cent respectively during the week ending November 7, notes the bulletin.

The repeal follows failure by the National Assembly to overturn President Uhuru Kenyatta’s memorandum in the Finance Bill, 2019 proposing the scrapping of the ate cap.

He declined to assent to the Bill which wanted the capping retained.

The gains by the shilling driven by dollars inflows comes when yields on government securities on the secondary market are declining as the National Treasury continues to avoid expensive bids.Turnover of bonds in the domestic secondary market declined by 19 per cent during the week.In the international market, yields on Kenya’s 7-year, 10-year (2024), 10-year (2028), 12-year and 30-year Eurobonds declined by 15.1, 19.8 14.9 17.1 and 9.2 basis points respectively.The gain follows a weakening period to mean of 101.69, 103.16, 103.30 and 103.80 in June, July, August and September respectively for the three months during demonetisation period.This was despite CBK governor Patrick Njoroge denying that the depreciation was linked to exchange of the Sh1000 old notes.Njoroge maintained at the time that […]

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