The Kenya shilling depreciated 1.1 percent against the US dollar in July closing the month at Ksh107.7 compared to Ksh106.52 recorded on June 30. However, during the last week of July, the shilling recorded marginal appreciation to close at Ksh107.7 compared to record lows of Ksh108.13 recorded the previous week.
On a year to date basis, the shilling remains battered depreciating by 6.3 percent against the US dollar. The shilling came under intense pressure in July as dollar demand soared due to increased demand from banks and merchandise importers.
Oversubscription in Government securities
In July there was a huge investor appetite for government securities that saw CBK mop a cumulative KSh275 billion from the domestic market. This was due to increased liquidity in the money markets and banks preferring government securities to lending to the private sector.
Cytonn report indicates that Treasury Bill auctions in July recorded an overall subscription rate of 243.1% compared to 233.4 % recorded in June. The Treasury Bill acceptance rate came in at 66.9% in July with CBK accepting KSh195.0 billion of the Ksh291.7 billion worth of bids received. There was a decline in the yield on the 91-day, 182-day, and 364-day paper to 6.2%, 6.6% and 7.5% respectively from 7.1%, 7.8%, and 8.8% recorded in June.
The reopened 5-year, 8-year, and 14-year bonds were oversubscribed as subscription rate came in at 303.0% with the government collecting Ksh80 billion out of the KSh 181.8 billion worth of bids received.
In July Forex reserves declined by $381 million from the $9.717 billion recorded on July 2 to $9.336 billion on July 30. However, the reserves were slightly higher than the amount recorded on June 25th ($9.229 billion). CBK maintains that the reserves remain adequate to cover 5.66 months of imports.
In July inflation remained anchored around the target range declining to 4.4 percent compared to 4.6 percent registered in June. CBK attributed the low inflation rate to a general decline in food prices as food inflation decline to 6.6 percent in July from 8.1 percent in June.