Central Bank buys dollars to curb shilling volatility

Central Bank of Kenya (CBK) Governor Kamau Thugge. FILE PHOTO | DENNIS ONSONGO | NMG

Kenya’s shilling gave up some of its gains in afternoon trading on Thursday, after traders said the central bank bought dollars to curb volatility as the currency surged to its strongest level since June 2023.

The Central Bank of Kenya says it only intervenes to smooth out volatility when the shilling is moving too fast in either direction.

Read: Kenyan shilling posts strongest single-day gain in 12 years

At 1250 GMT, commercial banks quoted the shilling at 145.00/146.00 to the US dollar, up more than 3 percent on Wednesday’s closing rate of 150.00/151.00.

At one point on Thursday the shilling was up almost 8 percent on the day, bid as strong as 139.00 to the US dollar, LSEG data showed, in a rally fuelled by foreign inflows into Kenyan domestic debt and the resolution of a $2 billion Eurobond maturing in June.

“The central bank showed up to buy, so I think they don’t want too much volatility. If they hadn’t come in we would probably be looking at levels of maybe 130 because everybody knows offshore inflows are coming,” one trader said.

“That is a strong signal that they (the central bank) want the currency to stabilise. It has to be gradual.”

This week, Kenya sold a new $1.5 billion Eurobond maturing in 2031 which it will use to buy back via a tender offer a large chunk of the $2 billion bond due in June.

Read: Shilling gains against dollar after sale of new Eurobond

The government also sold a Sh70 billion infrastructure bond, receiving over Sh288 billion of bids and strong offshore investor participation.