NAIROBI, Dec 3 (Reuters) – Stanbic Bank Kenya, a unit of South Africa’s Standard Bank, has distanced itself from a research note issued by its parent that said a parallel exchange rate was emerging in Kenya, where the coranavirus crisis has hit dollar earnings.
The central bank’s official exchange rate has stayed around 110 shillings to the dollar, but the Standard Bank note published on Monday said Kenyan banks have shunned interbank deals at that level, offering the dollar at 113-115 shillings.
The note said that “two FX rates have been developing in the market” since the end of June and early July — a period when strains caused by the coronavirus crisis, such as a slide in vital tourist dollar revenues, were starting to be felt.
The exchange rate has long been a sensitive issue. The central bank has in the past challenged the International Monetary Fund when it said the shilling was overvalued.
When previously asked by reporters about the emergence of different rates, Central Bank of Kenya Governor Patrick Njoroge has said Kenya has a flexible rate policy and only intervenes to smooth volatility. He most recently repeated this on Friday.
“The contents of the report do not reflect the position of Stanbic Bank Kenya Limited,” Stanbic said in a statement on Thursday, distancing itself from its parent’s note.
Bankers say the central bank has told them it believes the shilling is fairly priced and say the bank has been monitoring dealings closely, telling banks that transactions must be driven by demand and not driven by speculation.
Njoroge, a former senior International Monetary Fund official who took charge of the central bank in 2015, has previously said his focus was “instilling discipline” in the currency market.
The shilling has weakened by 8.5% against the dollar this year, the central bank said last week. But it has fared better than other frontier currencies including the Mauritius rupee, the Nigerian naira and the Zambian kwacha.
The Standard Bank note said that “due to this divergence in screen and FX interbank rates, admittedly price discovery has been very cumbersome.” It said the central bank had not sold dollars in the market in the past month, saying that if it had done so at the official rate it would have helped rates converge.
Central bank officials have declined to comment on the report when contacted by Reuters.
The Kenyan unit said the author of the report, Jibran Qureishi, who was previously the East Africa economist at Stanbic, had moved to a new position at the parent bank this year. He was not immediately available for comment.
The IMF said in 2018 the shilling was overvalued and cited strict management of the market by the central bank. The governor challenged this view at the time, questioning the calculation used by the IMF to reach that conclusion.
Editing by Edmund Blair