The Kenya Shilling appreciated by 0.5 percent against the US Dollar during the month of February to 101.6 shillings from 102.2 shillings at the end of January.
The appreciation, according to Cytonn Investments, was mainly as a result of increased flower exports to the Eurozone in the middle of the month that saw the Shilling hit a 1-year high of 100.8 shillings against the USD but later depreciated.
During the week, the Shilling gained 0.4 percent against the USD to 101.3 shillings from 101.7 shillings the previous week due to increased inflows from horticultural exports.
On a YTD basis, the shilling has gained 1.8 percent against the USD. “In our view, the shilling should remain relatively stable against the dollar in the short term”, supported by:
- Weakening of the USD in the global markets as indicated by the US Dollar Index, which shed 9.9 percent in 2017, and has shed 2.3 percent YTD,
- Improving diaspora remittances which increased by 26.6 percent to USD203.8 million in December 2017 from USD 160.9 million in December 2016 driven by a 39.2 percent and 30.9 percent increase in remittances from North America and Europe, respectively, and,
- CBK’s intervention activities, as they have sufficient forex reserves, currently at USD 7.2 billion (equivalent to 4.8 months of import cover). Key to note is that the IMF withdrew the USD 1.5 billion standby facility with Kenya effective March 2018 as conditions previously agreed upon for the facility to be extended had not been met. However, an IMF team is still in Nairobi discussing a possible new program. This will deprive Kenya of approx. 1 month of import cover in case of any pressure on our Balance of Payment (BOP) position.