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Shilling Sheds Off 1.2% in May: Will it Hold Strong in June?

BY Juma · June 4, 2018 06:06 am

The Kenya Shilling depreciated by 1.2 percent against the US Dollar during the month of May to 101.6 shillings from 100.4 shillings at the end of April.

The depreciation was mainly as a result of increased dollar demand by multinationals and importers towards the end of the month.

Last week, the Kenya Shilling depreciated by 0.5 percent against the US Dollar to close at 101.6 shillings from 101.1 shillings the previous week, due to continued end-month dollar demand by oil importers.

On a YTD basis, the shilling has gained 1.6 percent against the USD. In our view, the shilling should remain relatively stable against the dollar in the short term, supported by:

  1. Stronger horticulture export inflows were driven by increasing production and improving global prices,
  2. Improving diaspora remittances, which increased by 50.6% to USD 222.2 million in March 2018 from USD 147.5 million in March 2017, attributed to (a) recovery of the global economy, (b) increased uptake of financial products by the diaspora due to financial services firms, particularly banks, targeting the diaspora, and (c) new partnerships between international money remittance providers and local commercial banks making the process more convenient, and,
  3. High forex reserves, currently at USD 9.0 billion (equivalent to 6.1 months of import cover) and the USD 1.0 billion precautionary agreement by the IMF, still available until September 2018. The recent decline from a high of USD 9.5 billion in reserves was attributed to repayment of the outstanding balance of the matured USD 750.0 million syndicated loans taken in October 2015.

Juma is an enthusiastic journalist who believes that journalism has power to change the world either negatively or positively depending on how one uses it. (020) 528 0222 or Email: info@sokodirectory.com

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