Kenyan Shilling Holds a Stable Position to Close at Sh.100.2

The Kenya Shilling, for the second consecutive week, has held a stable position closing at 100.2 shillings, similar to the previous week.

The strength has been attributed to support from inflows from horticulture exports and Diaspora remittances, which offset the dollar demand from manufacturers and oil importers.

The Kenya Shilling has appreciated against the US Dollar by 1.6 percent year to date, in addition to the 1.4 percent appreciation in 2018.

“The shilling should remain relatively stable to the dollar in the short term,” Cytonn Investments weekly report says.

According to Cytonn, the stability of the shillings is expected as a result of the narrowing of the current account deficit to 5.1 percent in the 12-months to November 2018, from 6.5 percent in November 2017.

The narrowing of the deficit is owed to improved agriculture exports, increased diaspora remittances, strong receipts from tourism and slower growth in imports due to lower food and SGR–related equipment imports and the decline in international oil prices.

Improving diaspora remittances, which increased by 38.6 percent in 2018 to 2.7 billion dollars from 1.9 billion recorded in 2017 are also set to stabilize the currency.

The rise in remittances is due to increased uptake of financial products by the diaspora due to financial services firms, particularly banks, targeting the diaspora, as well as new partnerships between international money remittance providers and local commercial banks making the process more convenient,

Additionally, Cytonn identifies CBK’s activities in the money market as another reason that will strengthen the Kenyan shilling.

The activities include repurchase agreements and selling of dollars, and, high levels of forex reserves, currently at 8.1 billion, equivalent to 5.3-months of import cover, compared to the one-year average of 5.1-months and above the EAC Region’s convergence criteria of 4.5-months of imports cover.

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