Central Bank of Kenya says ready for Brexit

The Central Bank of Kenya. PHOTO | FILE 

By BD REPORTER AND REUTERS

In Summary

• The British pound had collapsed no less than 17 U.S. cents, easily the biggest fall in living memory, to hit its lowest since 1985. The euro in turn slid 3.4 percent to $1.0997 EUR= as investors feared for its very future.

The Central Bank of Kenya Friday said it is ready to intervene and minimize disruption in money markets, as Britain voted to exit the EU.

"The Central Bank of Kenya stands ready to intervene in the money and foreign exchange markets to ensure their smooth operation" the regulator said as Britons voted to leave the economic bloc.

The CBK has been ramping up its firepower since the central bank governor took over raising its reserves to more than 5 months of import cover. However analysts say the shilling is over valued, a position which makes it vulnerable to shocks.

The decision has sparked uncertainty given that Britain is Kenya's third largest export market and a key ally.

Britain has voted to leave the European Union, results from Thursday's landmark referendum showed, an outcome that sets the country on an uncertain path and deals the largest setback to European efforts to forge greater unity since World War Two.

World financial markets dived as nearly complete results showed a 51.8/48.2 percent split for leaving. Sterling suffered its biggest one-day fall of more than 10 percent against the dollar, hitting a 31-year low on market fears the decision will hit investment in the world's 5th largest economy.

The vote will initiate at least two years of messy divorce proceedings with the EU, raise questions over London's role as a global financial capital and put huge pressure on Prime Minister David Cameron to resign, though he pledged during the campaign to stay on whatever the result.

The euro slumped more than 3 percent against the dollar on concerns a Brexit vote will do wider economic and political damage to what will become a 27-member union. Investors poured into safe-haven assets including gold, and the yen surged. European shares were on course to open 6 to 7.5 percent lower.

There was no immediate comment from the Bank of England. Global policymakers prepared for action to stabilize markets, with Japanese Finance Minister Taro Aso promising to "respond as needed" in the currency market.

Britain's eurosceptic forces

Yet there was euphoria among Britain's eurosceptic forces, claiming a victory they styled as a protest against British political leaders, big business and foreign leaders including Barack Obama who had urged Britain to stay in the bloc.

READ: Kenya to feel pain if Britain exits the EU

"Dare to dream that the dawn is breaking on an independent United Kingdom," said Nigel Farage, leader of the eurosceptic UK Independence Party.

"If the predictions are right, this will be a victory for real people, a victory for ordinary people, a victory for decent people ... Let June 23 go down in our history as our independence day."

He called the EU a "doomed project".