Joseph Bonyo
17 October 2008
Nairobi — The Central Bank on Friday moved to quell unease following an unprecedented fall in the value of the shilling this week, blaming it on speculative behaviour and hoarding of the dollar by some local banks.
A statement released by Central Bank of Kenya governor Professor Njuguna Ndungu, said nothing had changed to warrant the recent weakening of the shilling to a three-year low against the dollar, as all fundamentals on the economy were still strong.
"Fundamentals on exchange rates and foreign exchange demands and supply have not changed. There are no significant signs of foreign exchange supply constraints now or in the near future," he said.
On Tuesday, commercial banks traded the shilling at 76.10/20 to see it touch a three-year low, in what experts said was caused by panic sales and banks moving to cover short positions.
In an apparent attempt to calm the market and avert panic sales, the governor said the country had enough dollars to cushion it against any shock that may hit the local market.
Commercial banks have $1.5 billion in their accounts, while CBK is holding foreign exchange reserves equivalent to four months of Kenya's import.
"The CBK stands ready to minimise excess volatility in the market and will take necessary action as and when required," he added. Meanwhile, a day after the exit of its chief executive Mr Peter Mwangi, trading of shares at Centum Investment dipped four per cent at the bourse.
The share price opened the session at Sh17.15 and dipped to Sh15.45 in the course of trading. The price, however, closed at an average of Sh16.55, with 31,700 transferred, compared to 28,200 in the previous days trading.
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