Kenyan Shilling Shines against the US Dollar during the Q1 of 2019

The Kenyan shilling shined against the US Dollar during the first quarter of 2019 according to stats released by Cytonn Investments.

During the Q1 of 2019, the Kenya local currency gained against the US Dollar by 1.1 percent to close at 100.8 shillings from 101.8 shillings at the end of December 2018.

Analysts have attributed the gaining of the shilling against the Dollar mainly to the inflows from diaspora remittances amid thin dollar demand from oil importers.

During last  week, the Kenya Shilling depreciated marginally by 0.05 percent against the dollar to close at 100.8 shillings from 100.7 shillings the previous week, due to end-month demand from the energy and manufacturing sector exceeding dollar inflows from remittances.

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 percent recorded in January 2018 will continue shielding the shilling.

The decline in the account deficit has been attributed to improved agriculture exports, increased diaspora remittances, strong receipts from tourism, and lower food and SGR-related equipment relative to 2017.

The shilling will continue enjoying the improving diaspora remittances, which increased by 38.6 percent in 2018 to USD 2.7 billion from USD 1.9 billion recorded in 2017 due to increased uptake of financial products by the diaspora due to financial services firms, particularly banks, targeting the diaspora.

The Central Bank of Kenya has remained supportive to the local currency with its continuous activities in the money market, such as repurchase agreements and selling of dollars.

There is high forex reserves, currently at USD 8.3 billion equivalent to 5.4-months of import cover, thus meeting 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.