Shilling Marginally Declines Against The Dollar But Still Resilient

The Kenyan shilling has continued being resilient against the US Dollar, the Sterling Pound, and the Euro as the year moves on toward the end, sharply putting off those who had predicted its doom at the start of 2018.

Various economic and market analysts had, at the start of this year, said that the local currency would mostly receive the heat from the dollar with some saying that it would fall to as lower as 110 shillings to the dollar.

Last week, the Kenya Shilling declined marginally against the US dollar to close at 100.7 shillings to the dollar from 100.6 shillings the previous week.

The marginal dip was supported by dollar inflows from the Non-Governmental Organization’s (NGO’s) and the Information Technology (IT) sector.

The Kenya Shilling has appreciated by 2.4 percent year to date with analysts from Cytonn Investments still holding the view that the currency will be strong but only in a short term.

Since the year kicked off, there has been a narrowing of the current account deficit to 5.8 percent in the 12-months to June 2018, from 6.3 percent in March 2018.

The narrowing of the deficit has been attributed to improved agriculture exports, and lower capital goods import following the completion of Phase I of the Standard Gauge Railway (SGR) project,

There is a stronger inflows from principal exports, which include coffee, tea, and horticulture, which increased by 10.8 percent during the month of May to 24.3 billion shillings from 21.9 billion shillings in April, with the exports from coffee, tea and horticulture improving by 11.0, 19.1 and 2.0 percent on m/m.

The shilling will continue being supported with the improving diaspora remittances, which increased by 71.9 percent on y/y to USD 266.2 million in June 2018 from USD 154.9 million in June 2017 and by 4.9 percent m/m, from USD 253.7 million in May 2018.

The largest contributor of diaspora remittances was North America at USD 130.1 million attributed to:

1. Recovery of the global economy,
2. Increased uptake of financial products by the diaspora due to financial services firms, particularly banks, targeting the diaspora,
3. New partnerships between international money remittance providers and local commercial banks making the process more convenient