CBK governor Patrick Njoroge has defended the weakening of shilling, saying the current sway could have been caused by normal high demand for dollar by importers.
On Tuesday, the shilling sunk veered into 102 margin for the first time since early January to trade at Sh102.05 compared to Sh101.55 the previous day.
“The movement it has had over the last few weeks is not an issue,” Patrick Njoroge told a press conference yesterday adding the foreign exchange reserves held by the bank were the highest the bank had ever held.
He said that CBK is holding highest foreign reserves in history, enough to caution the shilling in case of volatility, adding that the depreciation witnessed should not cause panic in the market.
The CBK usable foreign exchange reserves were at $10.08 billion Sh1.08 trillion (6.4 months of import cover) as at June 13.
He further dismissed reports that the expected demonitisation exercise to recall old Sh1000 notes by October 1 is pumping excess liquidity in the market as mass holders rush to beat the exchange deadline.
The government announced on June 1 a change in Kenya's currency notes.
The shilling 1,000 note will be retired effective October 1, while new denominations of Sh500, Sh200, Sh100 and Sh50 would be in circulation alongside the old ones which will be gradually phased out.
‘’A lot of money being exchanged is following legal channels. No case of mass dumping has been reported. The effect of few backdoor currency exchange dealers is insignificant. None has been reported either,’’ Njoroge said.
Even so, the new notes euphoria has seen Kenyan shilling lose value especially at the border with Uganda and Tanzania despite CBK’s denial.
A trader Julius Omondi told the Star the Kenyan shilling was being exchanged at 33 units at the Ugandan border yesterday ,down from Ush37 last week.
This may have been sparked by a ban imposed by Tanzania and Uganda on the exchange of the Kenyan currency following the introduction of new banknotes and the impending phasing out of the old Sh1,000.
Yesterday, CBK governor said those bans were effected on Kenyan request, adding that those who have old Sh1000 notes anywhere in the world should follow right channel to exchange before October 1 to avoid being locked out.
The dollar recorded minimal improvement yesterday to trade at Sh102 compared to Sh102.12 on Wednesday.
