Cost of Propping Up Kenya's Shilling Seen in Dwindling Reserves
- Currency falls to nine-month low as new Eurobond is mooted
- Foreign-exchange reserves drop as central bank intervenes
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Kenya’s shilling is one of only two African currencies that have eked out gains against the dollar this year -- but it’s come at the cost of diminishing foreign-exchange reserves.
The shilling is still up 1.3 percent against the greenback this year even after losing some ground since mid-April as higher oil prices and rising government debt weighed on investors’ minds. The Central Bank of Kenya’s foreign reserves dropped by 13 percent in the same period to the lowest since March, when they were bolstered by a $1 billion Eurobond sale. Using reserves to protect the shilling may prove futile, however.