Kenya’s foreign exchange reserves stood at KSh1.97 trillion as of August 6, equivalent to 6.3 months of import cover, giving the country a substantial buffer against external economic pressures.
According to the Central Bank of Kenya (CBK) Weekly Bulletin dated August 7, the reserves remained well above the statutory minimum of four months of import cover.
The Kenyan shilling also remained largely stable against major currencies during the week ending August 6.
The shilling traded at KSh129.41 against the US dollar on August 6, compared with KSh129.40 on July 30, representing minimal movement against the dollar.
Banking system maintains adequate liquidity
The domestic money market remained liquid during the week, with the CBK continuing open-market operations to manage liquidity conditions.
Commercial banks’ excess reserves averaged KSh17.7 billion above the required Cash Reserve Ratio of 3.25 per cent.
The Kenya Shilling Overnight Interbank Average Rate (KESONIA) remained unchanged at 8.75 per cent on August 6.
Interbank market activity, however, increased, with the average number of transactions rising to 21 from 17 the previous week. The average value traded also increased to KSh13.4 billion, up from KSh12 billion.
Treasury bills attract strong investor demand
Government securities continued to attract investor interest, with the Treasury bill auction held on August 6 receiving bids worth KSh30 billion against an advertised amount of KSh28 billion.
This represented a 107 per cent performance rate, indicating demand above the amount offered.
The CBK said interest rates on the 91-day, 182-day and 364-day Treasury bills declined marginally during the week.
NSE records mixed performance
Trading at the Nairobi Securities Exchange (NSE) produced mixed results during the week.
The NSE All Share Index (NASI) declined by 0.87 per cent, while the NSE 25 Share Index fell by 0.18 per cent.
The NSE 20 Share Index, however, gained 1.13 per cent.
Market capitalisation declined by 0.87 per cent, although trading activity increased significantly.
Total shares traded rose by 62.18 per cent, while equity turnover increased by 45.53 per cent.
The domestic secondary bond market recorded a 34.30 per cent decline in turnover during the week.
Global inflation and geopolitical risks persist
The CBK warned that inflation risks remained elevated in advanced economies amid renewed tensions around the Strait of Hormuz, which it said remained effectively closed.
In the Euro Area, inflation increased to 2.9 per cent in July, from 2.8 per cent in June, mainly driven by higher energy prices. Core inflation also rose to 2.5 per cent.
Despite the pressures, global economic activity remained resilient. The J.P. Morgan Global Composite Purchasing Managers’ Index Output Index improved marginally to 52.6 in July.
The US Dollar Index strengthened by 0.07 per cent during the week.
Oil prices fall as gold reaches record high
Commodity markets recorded mixed movements during the period.
Murban crude oil prices fell to $72.54 per barrel on August 6, from $78.24 on July 30, despite heightened geopolitical tensions in the Middle East.
Gold prices moved in the opposite direction, with spot prices climbing to a record $4,240.41 per ounce, up from $4,102.40 over the same period.
The latest CBK data points to a relatively stable domestic financial environment, supported by strong foreign exchange reserves, a stable shilling and adequate liquidity in the banking sector.
However, global inflation, energy prices and geopolitical tensions remain key risks to Kenya’s economic outlook.
