CBK says shilling not out of line with other currencies

While relying on year to date changes of other world currencies to the US dollar, the reserve bank notes the dollar has significantly strengthened against not just peers but also other world currencies including those of developed economies.

For instance, while the shilling has shed three per cent of its value against the green buck in the year to date, the Japanese Yen, the Swedish Krona and the Euro have lost ground by 10.3, 9 and 7.9 per cent respectively.

Closer home, the South African rand has shed 7.2 per cent of its value to the dollar with the Nigerian Naira and the Ghanian Cedi having shed 4 and 4.2 per cent of their values respectively.

The only exception to the trend has been currencies including the Zambian Kwacha which has gained nearly 20 per cent after ‘significant changes to the country’s economy in the past 12 months.

“The question of whether we have been out of line with other currencies does not arise. Basically, partly and significantly, it has to do with the strengthening of the dollar against most currencies around the world,” said CBK Governor Dr. Patrick Njoroge.

The CBK states that it has held its policy on non-intervention in the foreign exchange, only stepping in to stamp out volatility which would leave the economy susceptible to instability.

“At the end of the day, our exchange rate policy has not changed and ours is really a flexible exchange rate regime and we intervene just to minimize volatility but we do not set a direction or level. We allow the markets to push the exchange rate, strengthen and weaken it, as long as there is no volatility,” added Dr. Njoroge.

The shilling is currently exchanging for the dollar at historical lows as the unit carries the weight of increased dollar demand and ongoing volatility linked to the evolving COVID-19 pandemic.

CBK quoted the shilling at Ksh.112.48 to the dollar at the close of trading on Monday.