THE shilling has depreciated again after a brief appreciation last weekend following an upsurge demand in the interbank and corporate markets.
On Wednesday, the shilling reached 1,840/- a dollar, up from 1,650/- as of last Friday. The brief appreciation follows the central bank’s decision to release more dollars to cool down the market.
A report issued by Standard Chartered Bank on Tuesday said corporate clients took advantage of the significant lower levels of exchange rate experienced in the morning but in return pushed the market curve up.
“The trend was seen in the morning and covered some of their demand at these levels while pushing the market up,” Standard Chartered bank said in the market report.
The demand pushed the shilling to a low level of 1,840/-, less than a week when the central bank assured the public that all efforts were in place to defend the local currency against further depreciation.
The bank report said that moderate level of volatility should be expected. The shilling last week depreciated to the lowest level in over four decades to reach 1,853/- a dollar.
As an effort to curb the negative trend, the central bank is spending an average of 100 US dollars (about 180bn/-) a month.
Last week, the BoT governor sent strong signals in the market that the central bank sought to help the currency to return to below 1,700/- levels. However, the results expected to yield some gains starting this week.
Other measure to lower the maximum net open position limit for banks from 20 per cent to 10 per cent would force banks to offload their dollar reserve thus strengthening the shilling.
Meanwhile, the central bank has managed to mop out 30bn/- using repurchasing agreements (Repos) of seven and 14 days at 6.43 and 9 per cent respectively.
However, the Repos amount is lower compared to over 7 per cent and almost 10 per cent in the previous week. On the other hand, the interbank overnight traded between 12.5 and 13.5 per cent levels.
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