The Kenyan shilling slightly dipped against the US Dollar but maintained its resilience during the sessions last week according to data compiled by Cytonn Investments.
The Kenya Shilling lost by 0.2 percent against the US Dollar to close at 101.0 shillings from 100.7 shillings the previous week attributable to increased dollar demand from importers amidst excess liquidity in the money markets.
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.
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.
There has been an improving diaspora remittance, 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:
The CBK has remained supportive of the local currency 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 8.1 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.