The Kenya Shilling lost 0.3 percent against the US Dollar to close at 101.3 shillings from 101.0 shillings during the sessions last week.
Analysts from Cytonn Investments have attributed the slight dip to increased dollar demand from merchandise importers.
The Kenya Shilling has appreciated by 0.9 percent year-to-date in addition to 1.3 percent in 2018, and in “our view the shilling should remain relatively stable to the dollar in the short term,” said Cytonn in their weekly report.
The shilling continues to enjoy the narrowing of the current account deficit with preliminary data on balance of payments indicating continued narrowing to 4.7 percent of GDP in the 12-months to February 2019, from 5.5 percent recorded in February 2018.
The decline in the current account has been attributed to improved agriculture exports, increased diaspora remittances, strong receipts from tourism, and lower food and SGR-related equipment relative to 2017.
Kenyans abroad have continued to improve in diaspora remittances, which increased by 17.2 percent m/m in January 2019 to USD 244.8 million from USD 208.9 million recorded in a similar period of review in 2018.
The rise in diaspora remittances is due to:
- 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 Central Bank of Kenya has remained supportive of the local currency with its activities in the money market, such as repurchase agreements and selling of dollars.
There are 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-months of import cover, and the EAC region’s convergence criteria of 4.5-months of import cover.
The Kenyan shilling has remained resilient despite analyst holding the view that the resilience is just for a short period.