Last week, the Kenya Shilling weakened further against the US Dollar, closing the week at KSh 132.57 from KSh130.73 the previous week.
The Shilling’s 1.4% downtick dragged the year-to-date performance to 15.3%.The marginal weakening is partly attributed to high demand for dollars during the week, coupled with the weekly protests as effects of the recent Moody’s downgrade permeates through the economy.The equities market closed the week on a bearish note, signaled by the NSE All Share Index (NASI), which was down marginally week on week by 4.1% to close at 104.2.Similarly, the year-to-date performance dropped to 13.1%, buoyed by significant losses from large cap stocks during the week.
In the international markets, yields on Kenya’s Eurobonds increased by 11 basis points, reflecting jittery investor sentiments on the back of recent developments in the country, in turn compromising the country’s fiscal position.
This also comes two weeks after Moody’s downgrade that pointed to higher borrowing requirements and consequently increasing Kenya’s liquidity risks.
In the secondary market, the value of bonds traded during the week decreased by 40% to KSh26.9billion from KSh44.8billion recorded a week prior.
Liquidity conditions in the Money Market tightened, with the average interbank rate rising marginally to 13.2% from 13.1% recorded a week prior, partly attributed to government payments outpacing tax remittances. The interbank rate trailed within the adjusted CBK range, with market operations remaining active.
“Liquidity in the Money Market remained adequate during the week, supported by open market operations. Commercial banks’ excess reserves stood at KSh26.8 billion in relation to the 4.25 per cent cash reserves requirement,” the CBK weekly bulletin stated.
Kenya’s usable forex reserves dropped marginally by 1.3% to US$7,311 million, enough to maintain 3.8 months of import cover from US$7,409 million the previous week. The decrease is attributable to debt servicing by the government.
The foreign reserves fall below the 4 months statutory requirements and equally lower than the EAC’s convergence requirement of 4.5 months of import cover.
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