Central bank governor Dr Patrick Njoroge said on Thursday he was not concerned by this month’s falls in the shilling and the weakness was not linked to plans to invalidate the old Sh1,000 note.
The bank said on June 1 it would retire the old version of its biggest bank note in four months’ time, as part of a push to fight illicit financial flows, money laundering and counterfeiting.
Since then, the currency has lost a percentage point to touch an intra-day low of 102.00 per dollar on Monday, before paring back some of the losses to trade at 101.65/85 on Thursday.
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Some traders attributed the move to people with big stockpiles of old 1,000 shilling notes converting them into hard currency on the commercial market before they become worthless on the Oct. 1 deadline.
Anyone wanting to exchange large numbers of the old notes for new Kenyan shilling bills has to show where the money came from.
“The movement it has had over the last few weeks is not an issue,” central bank governor Patrick Njoroge told a news conference.
“We are focusing on a little movement which in the big structure, it doesn’t have the meaning that we are giving it.”
The East African nation is favoured by foreign investors mainly due to its diverse, fast-growing economy, but its reputation has long been tainted by widespread graft and weak application of anti-money laundering laws.
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Njoroge said the bank note plan had not led to any upsurge in demand for dollars, and his officials had stepped up market surveillance.
“Let’s say somebody is into money laundering and he is trying to go into U.S. dollars so they can take them away in their socks, the points is, do we have information about the transactions?” he said. “We have good information about the transactions.”
The central bank has an extra cushion for the shilling in the form of healthy foreign exchange reserves, which soared to Sh 1 trillion (USD10.08 billion) equivalent to import cover of 6.4 months, their highest ever level, Njoroge said.
“We have the firepower to deal with any eventuality and more,” he said.
Currency traders said the shilling had also come under pressure from demand by firms seeking hard currency to pay dividends to their shareholder’s abroad.
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