Kenyan Shilling Slightly Dips Against the Dollar But Still Resilient

By Soko Directory Team / Published April 29, 2019 | 6:19 am

The Kenyan Shilling Dollar Turnover Kenyan Shilling

Last week, the Kenya Shilling lost by 0.2 percent against the US Dollar to close at 101.5 shillings from 101.3 shillings the previous week.

According to Cytonn Investments in their weekly #CytonnReport, the slight drop by the local currency was attributable to increased dollar demand from the energy sector.

The Kenya Shilling has appreciated by 0.3 percent year to date in addition to 1.3 percent in 2018.

“In our view, the shilling should remain relatively stable to the dollar in the short term,” said analysts from Cytonn Investments.

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 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.

Kenyans in the diaspora have uped their game leading to improving diaspora remittances, which increased by 17.2 percent m/m in January 2018 to USD 244.8 million from USD 208.9 million recorded in a similar period of review in 2017. The rise is due to:

- 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,

The Central Bank of Kenya (CBK) has remained supportive of the shillings through its activities in the money market, such as repurchase agreements and selling of dollars.

There are high levels of forex reserves, currently at USD 8.4 billion equivalent to 5.4-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.

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