Between June 2021 and October 2023, the market exchange rate of the Kenyan shilling (KES) fell from 107.5 KES per 1 US dollar (USD) to 150.0 KES per 1 USD. In response, the Central Bank of Kenya (CBK) faced intense pressure to deploy its foreign exchange reserves and adjust monetary policy to defend the currency against further depreciation.
Evaluate, with the use of one or more appropriate diagrams, whether a central bank should attempt to prevent a depreciation in its country's exchange rate.
