The Kenyan shilling rejuvenated last week to slightly gain against the US Dollar, a few days after hitting a 10-month low though analysts say the local currency still has a long way to go.
During the sessions last week, the Kenya Shilling gained by 0.7 percent against the US Dollar to close at 102.4 shillings to the dollar from 103.2 shillings to the dollar recorded the previous week.
The slight gaining of the shilling against the dollar was partly attributed to tightened liquidity, as well as support from inflows from horticulture exports and diaspora remittances that helped to meet increased dollar demand from merchandise importers shipping goods ahead of the festive season.
The Kenya Shilling has appreciated by 0.7 percent year to date, and analysts from Cytonn are of the view that the shilling should remain relatively stable to the dollar in the short term, supported by CBK’s activities in the money market, such as repurchase agreements and selling of dollars.
There have been high levels of forex reserves, currently at USD 8.1 billion, equivalent to 5.3-months of import cover, compared to the one-year average of 5.5-months, which is above the International Monetary Fund (IMF) threshold for emerging markets, which is 3-months.
The shilling will also enjoy the improving diaspora remittances, which increased by 71.9 percent 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, with the largest contributor being North America at USD 130.1 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
- New partnerships between international money remittance providers and local commercial banks making the process more convenient.
The shilling had been resilient against the US dollar since January 2018 supported by constant shielding from the Central Bank of Kenya which is said to have used at least 300 million US dollars.