Weakening shilling eats into Kenya's dollar reserves

Kenya's foreign exchange reserves have declined by 61 million U.S. dollars in the past one week as the shilling slides following pressure from international currencies.

Analysts have attributed the fall of the currency to increased dollar demand from companies, which seek to balance their books before close of the year, and the rise in the value of the U.S. dollar to 14-year high.

On Tuesday, the Central Bank of Kenya (CBK) quoted the shilling at 102.25 against the dollar, down from 102.06 at end of Friday last week.

The dollar reserves, CBK data showed Tuesday, stand at 7.25 billion dollars or 4.74 months of import cover, down from 7.31 billion dollars or 4.78 months of import cover last week.

The apex bank usually uses the dollar reserves to prop up the shilling if it comes under pressure from international currencies.

Nairobi-based investment firm Cytonn said the forex reserves drop is worrying as the rate of decrease in the reserve is an indication that the shilling may weaken further if high dollar demand continues and the regulator may lack dollars to buttress it in coming weeks amid global strengthening of the dollar. Endit