Last week, the Kenya Shilling edged down by 0.5 percent against the US Dollar to 100.2 shillings from 99.7 shillings the previous week.
The performance of the shilling last week was attributable to high dollar demand from the manufacturing and energy sector, which outweighed inflows from diaspora remittances.
The Kenya Shilling has appreciated by 1.6 percent year to date, with analysts from Cytonn Investments still holding the view that the shilling will enjoy the stability not for long.
The shilling continues to enjoy the narrowing of the current account deficit with preliminary data on balance of payments indicating continued narrowing to 4.6 percent of GDP in the 12-months to January 2019, from 5.5 recorded in January 2018.
The decline has been attributed to improved agriculture exports, increased diaspora remittances, strong receipts from tourism, and lower food and SGR-related equipment relative to 2017.
There is still an improving diaspora remittance, which increased by 38.6 percent in 2018 to USD 2.7 billion, from USD 1.9 billion recorded in 2017.
CBK’s activities in the money market, such as repurchase agreements and selling of dollars, and the high levels of forex reserves, currently at USD 8.1 billion equivalent to 5.3-months of import cover, above the statutory requirement of maintaining at least 4.0-months of import cover, and the EAC region’s convergence criteria of 4.5-months of import cover will help shield the local currency.