Shilling Remains Stable Against Dollar Over the Week

During the week, the Kenya Shilling remained stable against the US dollar, remaining unchanged at 100.8 shillings from the previous week.

The Central Bank of Kenya (CBK) attributed this to an even match in the demand for and supply of the US dollar in the forex market.

According to Cytonn Investments, they had a view, that the shilling should remain relatively stable against the dollar in the short term, supported by the narrowing of the current account deficit, to 8.9 percent of GDP in Q1’2018 compared to 11.3 percent in Q1’2017 on account of faster growth of exports at 7.1 percent, compared to import growth at 6.5 percent.

Stronger inflows from principal exports, which include coffee, tea, and horticulture, which increased by 9.3 percent during the month of April to 21.9 billion shillings from 20.0 billion shillings in a similar period the previous year contributed to the stability of the shilling, with the exports from coffee, and horticulture increasing by 6.7 percent, and 25.0 percent y/y, respectively, while tea exports have declined marginally by 1.6 percent y/y,

Also, improving diaspora remittances, which increased by 16.9 percent to USD 253.7 million in May 2018, from USD 217.1 million in April 2018, with the largest contributor being North America at USD 122.8 million attributed to recovery of the global economy, increased uptake of financial products by the diaspora due to financial services firms, particularly banks, targeting the diaspora, and new partnerships between international money remittance providers and local commercial banks making the process more convenient.

High forex reserves, currently at USD 8.9 billion (equivalent to 5.9 months of import cover) and the USD 1.5 billion stand-by credit and precautionary facility by the IMF were also stated to have contributed to the stability of the shilling, still available until September 2018.