Central bank intervenes to prop up Kenyan shilling

Central Bank of Kenya (CBK) sold foreign exchange in early trade on Friday, after yields on the 91-day Treasury bill fell below 10 per cent at auction on the previous day, making it less attractive to offshore investors.

The intervention briefly strengthened the shilling before it slipped back to 102.2040 to the dollar by 0646 GMT. The currency had closed at 102.2535 on Thursday.

“The central bank was in the market earlier today,” said one dealer, adding it was probably prompted by the fall in yields. A second trader also confirmed the intervention.

CBK does not normally comment on interventions.

The surge in yields on T-bills of various tenors last month to above 20 per cent had attracted offshore dollar inflows, helping reverse some of the recent weakness in the currency.

Dealers said the slide in yields could now start putting more pressure back on the shilling, which in September had almost touched its 2011 all-time low of 106.80.

The currency has been under pressure from a range of factors such global dollar strength and Kenya’s widening trade gap.

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