Nairobi — The Central Bank of Kenya (CBK) Governor, Kamau Thugge, has said that the Kenyan shilling has for a while been 'artificially strong'.

Overvaluation of the local currency against the greenback has caused a decline in international reserves.

"I think we try to maintain a fairly artificial strong exchange rate but also at the cost of loss of international reserves. That overvaluation became obvious last year," said Thugge.

His statement comes against the backdrop of a dwindling shilling, even as the local currency recorded the heaviest plunge in years.

A spot check by Capital Business revealed that the shilling is currently trading at Sh150.01 against the US dollar.

The CBK boss has attributed the plunge to the difference in valuation over time between the foreign and domestic capital inflows.

Only weeks ago, Thugge said that the exchange rate pressure would cool very soon.

The expected stabilization of the shilling, he said, would be buoyed by declining imports and rising exports, among others.

Kenyan shilling has been under intense pressure from capital outflows as major economies such as the United States increase their base lending rates to contain inflationary pressure.

Importers of goods have also been lining up for dollars, exacerbating the problem.