Nairobi (Alshahid)-The Kenyan shilling continued its slide against the dollar in Tuesday’s trading – shedding 1.85 per cent of its value to close at Sh104 to the greenback defying the central bank’s action.
During Tuesday’s sessions, commercial banks quoted the shilling at an average of Sh104, a worse off position than Monday’s Sh102.
The Central Bank of Kenya, in a statement on Tuesday, admitted that its attempts to support the shilling have come a cropper as commercial banks withhold the dollars from the market.
The regulator indicated it will now sell the dollars directly to importers with the hope that this will unlock the supply constraints and ease pressure on the shilling.
“The Central Bank now proposes to sell foreign exchange directly to targeted sectors of the economy which are most beneficial to the widest public,” Prof Njuguna Ndung’u, the CBK governor said in a statement.
Direct participation in the currency market gives the central bank the power to directly defend the shilling, which has lost more than 25 per cent of its value since January.
CBK has consistently blamed speculation by currency traders for the shilling’s troubles and has recently taken strong measures — including the regular sale of dollars in the market — but that has had little impact on the exchange rate. Prof Ndung’u said he expected the latest policy action to shift a significant component of the demand for foreign exchange away from commercial banks.
Over the last month as the shilling fell, the CBK adopted a strategy of selling dollars directly to commercial banks to ease on the pressure. This was done selectively to spread the greenback into the market depending on each banks demand.
