Kenya shilling plummets to record low amid rise of dollar – Macau Business
The Kenyan shilling plunged to the lowest level this week as the U.S. dollar continued to strengthen following interest rate hike by the Federal Reserve, the Central Bank said in its weekly update on financial markets released Friday evening.
The shilling exchanged at an average of 121.20 against the dollar this week, a historical low, according to the apex bank.
The local unit has declined 8 percent year-to-date against the dollar.
The decline of the shilling saw the Central Bank support the currency using some of its dollar reserves, which fell by 30 million dollars to 7.286 billion dollars.
The apex bank normally props up the shilling in case of volatility in the market so that it doesn’t fall to a level that destabilizes the financial market.
With the shilling on free fall and imports getting expensive due to a stronger dollar, the Central Bank has struggled to maintain its dollar reserves above the minimum required level.
The 7.286 dollars reserves cover 4.11 months of import cover, the lowest cover in five years.
To curb inflation that has surged at a faster rate in 40 years, the U.S. Federal Reserve has raised its benchmark interest rate five times this year, a move that has seen currencies of developed and developing countries tank.