Nairobi - Kenya’s
central bank warned bankers and traders against making comments or forecasts
about the shilling that it deems too negative amid the currency’s worst run of
losses since 2006, according to people familiar with the matter.
Executives
from some of the country’s biggest lenders were summoned to meetings with
policy makers last week, the people said, asking not to be identified
because they aren’t authorized to speak about the issue. Others were telephoned
individually and warned against making comments the regulator says are fuelling
the shilling’s decline, they said. Grace Okara, the central bank’s
communications director, acknowledged by phone that she’d received an e-mailed
request from Bloomberg for comment, without responding to the questions.
Central
bank officials blame speculators for the slide in the currency of East Africa’s
largest economy, and told bankers to let the shilling be guided by market
fundamentals, the people said. The central bank’s stance is that the more
people comment on the currency’s movements, the steeper its decline, they said.
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Kenya’s
shilling has weakened every trading day since December 23, according to data
compiled by Bloomberg. The currency depreciated as the dollar strengthened
after the US Federal Reserve raised interest rates and as investors wary of
previous post-election violence in Kenya grow increasingly cautious ahead of a
presidential vote in August.
The warning
by the central bank echoes its criticism of lenders in 2011, when the currency
fell to a record. That year, former Governor Njuguna Ndung’u accused banks of
using funds from its overnight discount window to place speculative bets on the
the shilling.
Market fundamentals
The
shilling closed 0.1 percent weaker at 103.90 in Nairobi on Monday. It may
depreciate to 110 per dollar by the end of the year, as the central bank has
limited capacity to support the currency because of falling reserves, Cytonn
Investments Ltd. investment manager Martin Oduor told reporters in the capital,
Nairobi, on Monday. Traders have also cited increased demand for dollars by
fuel importers as oil prices rise.
Kenya’s
foreign-exchange reserves declined to $7.1 billion by Jan. 5 from $7.8 billion
in October after the central bank intervened to support the shilling in the
fourth quarter of last year, Cytonn said in a research note.
“The
central bank does not have the power or the capacity to support the shilling,”
Oduor said Monday.
BLOOMBERG