Kenya’s foreign exchange reserves last week surpassed the equivalence of five months of import cover for the first time since early August, buoyed by a steady shilling against the dollar, Central Bank of Kenya (CBK) data showed.
Forex reserves rose by a marginal 0.77 per cent to $7.545 billion (Sh776.38 billion) for the week ended Thursday, an equivalent of 5.01 months of import cover against a statutory requirement of four months.
This is the first time since the week ended August 3 that the reserves have edged above five months of import cover.
The slight but steady rise in forex reserves signals muted demand for the dollar by importers and corporates, also helped by increased inflows especially from Kenyans abroad.
Besides imports, the CBK uses the reserves to iron out adverse volatility on the shilling when it is under pressure by selling the dollars.
The shilling last week gained 0.23 per cent against the greenback, exchanging at 102.90 units on average compared with 103.14 the previous week.
The CBK, in its weekly bulletin, attributed the gain “partly to geopolitical tension in the Korean peninsula” after North Korea defied UN trade sanctions to shoot a missile over Japan.
Rich Management chief executive Aly-Khan Satchu said last week that although a weaker global dollar was presently a factor, the shilling has largely benefited from stronger remittance inflows, which he said may be underestimated by up to two-and-a-half times since the CBK data only focuses on formal channels.
“When I take it all in the mix, I think we (the shilling) are going to be around here (stable). The dollar has been weak and that has also helped us. I expect us (shilling) to be in 102-104 range (in near-term),” Mr Satchu said.
The Kenyan unit was exchanged at 102.93/103.13 against the dollar, largely unchanged from closing levels on Friday as the CBK’s monetary policy committee (MPC) was expected to keep its lending rate steady at 10 per cent.