Shilling Depreciates 0.1 Percent Against the Dollar to Close at KES 101.9

The Kenya Shilling during the last week depreciated by 0.1 percent against the US Dollar to close at 101.9, up from 101.7 shillings recorded the previous week, a trend attributed to increased dollar demand from oil and import merchants.

The Kenya Shilling has appreciated by 1.3 percent year to date, and according to Cytonn Investments, it should remain relatively stable to the dollar in the short term.

The projection of shilling stability is supported by a number of factors including the narrowing of the current account deficit, stronger inflows from exports, improving diaspora remittances, CBK’s activities in the money market, and high levels of forex reserves.

The narrowing of the current account deficit to 5.8 percent in the 12-months to June 2018, from 6.3 percent in March 2018 following improved agriculture exports, and lower capital goods imports following the completion of Phase I of the Standard Gauge Railway (SGR) project,

Stronger inflows from principal exports, which include coffee, tea, and horticulture, which increased by 9.3 percent y/y during the month of August to 19.7 billion shillings, from 18.1 billion in August 2018.

Improving diaspora remittances, which increased by 71.9 percent y/y to 266.2 million US Dollars in June 2018 from 154.9 million dollars in June 2017. The m/m trend improved 4.9 percent from 253.7 million dollars in May 2018, with the largest contributor being North America at 130.1 million dollars.

The improvement of the remittances was due to the 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 levels of forex reserves, currently at 8.2 billion US Dollars, equivalent to 5.4-months of import cover, compared to the one-year average of 5.5-months is also expected to stabilize the Kenyan shilling.