By Morris Aron
Central Bank of Kenya has clarified that the current foreign exchange fluctuations that has resulted in the shilling losing value against the dollar and strengthening against the Euro is due to international economic concerns in the Eurozone and not Kenya's creation.
At the same time, the banking regulator has urged firms to put their hedging instruments in place to cushion themselves from the effects of the on-going development.
In a press release to media houses, CBK said foreign exchange volatility is as a result of concerns over the Greece economy after revelations that the European country had borrowed past the stipulated guidelines set by the Eurozone.
"The Greek crisis has triggered a temporary 'flight to safety' in the US dollar," said a statement signed by CBK Governor Njuguna Ndungu. Recent trends of the shilling losing ground have presented mixed fortunes to importers and exporters of dollar and euro dominated economies.
Import costs
While exporters are anticipating gains as the trend results in cheaper and more competitive exports, importers — especially of capital goods, crude petroleum and such type commodities, including those who export horticulture to the Eurozone — are staring at losses as the trend results in increased import costs.
Following the development, local companies are now calling on Treasury to intervene.
The local unit slid to a six-year low against the greenback on Monday but eased slightly Tuesday following Treasury's decision to buy 8 million Euros from the market on Friday. The shilling was however still was above the Sh80 to the dollar for the early part of the week.
Source: The Standard | Online Edition
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