Kenya’s shilling remained stable against the US dollar in the week ending August 27, supported by strong investor demand for government securities despite persistent global economic uncertainty.

The local currency traded at Ksh129.47 per dollar on August 27, down from Ksh129.49 a week earlier.

The currency’s stability came as investors continued to show confidence in Kenya’s economy by pouring billions of shillings into Treasury bills and bonds.

Central Bank of Kenya’s (CBK) latest data shows the Treasury bill auction conducted on August 27 attracted bids worth Ksh56.7 billion against an advertised amount of Ksh28 billion, representing an oversubscription rate of 202.6 percent.

A Treasury switch bond auction held on August 24 also recorded strong demand, attracting bids worth Ksh22.6 billion against an offer of Ksh15 billion.

The auction achieved a performance rate of 150.6 percent, highlighting sustained appetite for government securities.

The strong investor interest helped reassure markets at a time when global economic risks remain elevated, with inflation concerns persisting in the United States and growth in the world’s largest economy slowing during the second quarter of the year.

Shilling Remains Stable Despite Global Risks

The stability of the shilling is significant for Kenya, which relies heavily on imported fuel, machinery, medicine and industrial raw materials that are paid for in dollars.

Sharp movements in the exchange rate can increase import costs and put pressure on businesses and households.

CBK said foreign exchange reserves stood at USD14.93 billion as of August 27, equivalent to 6.2 months of import cover.

Although reserves declined slightly from USD15.16 billion recorded a week earlier, they remained well above the statutory requirement of four months of import cover.

At the same time, global inflation concerns persisted.

The United States’ headline Personal Consumption Expenditures inflation remained elevated at 3.7 percent in July, while core inflation stood at 3.3 percent.

US economic growth also slowed to 1.5 per cent in the second quarter from 2.1 per cent in the first quarter.

Despite these developments, Kenya’s foreign exchange market remained largely stable, with strong reserves continuing to buffer external shocks.

The money market also remained liquid, with commercial banks holding excess reserves averaging KSh25.5 billion above the required cash reserve ratio.

KESONIA remained unchanged at 8.75 percent.

Market Confidence Remains Strong

Investor confidence was also reflected in the performance of the capital markets.

At the Nairobi Securities Exchange, the NASI, NSE 25 and NSE 20 share indices rose by 0.78 percent, 0.89 percent and 1.65 percent respectively during the week ending August 27. Market capitalization also increased by 0.78 percent.

While equity turnover and the number of shares traded declined during the week, the gains recorded across the major indices pointed to continued confidence among investors.

In the bond market, turnover in the domestic secondary market fell by 5.37 percent.

However, Kenya’s Eurobond yields declined by an average of 12.24 basis points, signaling improved sentiment in international debt markets.

Meanwhile, government borrowing continued to attract strong demand, offering CBK another sign of sustained investor confidence in Kenya’s financial markets.

The 91-day, 182-day and 364-day Treasury bills were all oversubscribed, pushing total bids well above the amount offered.

In the secondary bond market, activity eased slightly, although falling Eurobond yields suggested that investors were pricing in lower perceived risk on Kenya’s external debt.

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Kenyan Shilling Holds Firm at KSh129.47 as Forex Reserves Fall to $14.9 Billion
CBK Governor Kamau Thugge. PHOTO/Central Bank of Kenya