Forex reserves falls to Sh828bn as shilling strengthens

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Central bank forex reserves fall to $7.74 billion (Sh828.6 billion) at the end of April from $7.858 billion (Sh832.9 billion) confirmed a week earlier.

The trend at the end of April represents a fall of $ 1 billion since the start of the year and is a two-year low since March 2018 when the reserves had $7.15 billion (Sh729.81).

CBK reserve can now support 4.66 months of import.

The East Africa convergence criteria believes states should have 4.5 months of import on the least side, implying CBK reserve cover on import is heading to the alarming signboard.

However, the national statutory requirement requires the government bank to maintain a four-month import cover on the least side, implying the current 4.66 is sufficient.

On Wednesday, the shilling strengthened to 106.1 units against the dollar boosting trade, which was the best performance in 14 days. This was seen through the active involvement by the regulator to stabilize the shilling.

However, on April 30, the local currency fell to 107.29 units against the dollar.

The fall has primarily been attributed by the coronavirus outbreak that has seen weaker currencies loose value against major global currencies since investors prefer investing in more stable currencies.

“The shilling has remained under pressure since mid-March when the country reported its first case of Covid-19. Foreign investor outflows have increased, and CBK has used its forex reserves in a bid to support the shilling.” AIB Capital in a note.

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The Author of this Article is a registered Financial & Investment Analyst with Institute of Certified Investment and Financial Analyst. If your require more information Email: info@finsolutions.co.ke or +254 780216631

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