Shilling trades range bounds to the dollar as Brexit effects kick in

June 24, 2016
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The markets were very volatile on Friday's sessions as central banks across the globe are intervening to ensure some price stability for their currencies/FILE
The markets were very volatile on Friday’s sessions as central banks across the globe are intervening to ensure some price stability for their currencies/FILE

, NAIROBI, Kenya, Jun 24 – The Kenya shilling traded range bound against the dollar on Friday’s trading session at Sh101.05 against Sh101.45.

CBA’s Treasury Department says the markets were digesting developments in the United Kingdom in regard to the outcome of Britain’s decision to leave the European Union.

The markets were very volatile on Friday’s sessions as central banks across the globe are intervening to ensure some price stability for their currencies.

Expectations are for continued wide trading throughout next week.

The Central Bank of Kenya (CBK) announced that it is ready to intervene in the money and foreign exchange markets following the Brexit referendum results.

A statement from the Bank states that it will ensure there is smooth operations following projections that suggest that Britain is poised to leave the EU bloc following the vote.

“News reports this morning are predicting the outcome of yesterday’s UK Referendum Brexit to leave the European Union,” the statement pointed out. “The Central Bank of Kenya stands ready to intervene in the money and foreign exchange markets to ensure their smooth operation.”

The pound collapsed to its lowest level since 1985 as the unit takes a beating on fears that Britain will vote to leave the European Union, in what critics warned would be a hammer blow to financial markets.

The unit tumbled to $1.3466, its weakest level in three decades, according to Bloomberg data, as results in the EU membership referendum showed the “Leave” camp posting big wins and bookmakers making the exit camp favourites.

Investors took fright at the initial results, sending them rushing for lower-risk investments, with the dollar tumbling to just above 103 yen from around 106.80 yen.

The pound later edged back up to $1.4545 and the greenback recovered slightly to 105 yen, but analysts said there would likely be more volatility through the day.

ABC Capital Corporate Finance Manager Johnson Nderi says the uncertainty in Britain decision will see the sterling pound lose further while the dollar strengthen in the short term which will affect other currencies including the shilling.

“Right about now, there is volatility in the market, I will attribute it to uncertainty largely in the financial market, anybody with leverage positions might have wanted to pare back the positions to minimize their losses,” Nderi said.

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