Kenyan Shilling Appreciates 0.1% against the US Dollar to close at Ksh 101.3

Last week saw the Kenyan Shilling appreciating by 0.1 percent against the US Dollar to close at 101.3 shillings from 101.4 shillings the previous week.

The appreciating of the local currency has been attributed to the inflows from diaspora remittances, which outweighed dollar demand from merchandise importers.

The Kenya Shilling has appreciated by 0.5 percent year to date in addition to the 1.3 percent appreciation in 2018

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

The shilling continues to enjoy the narrowing of the current account deficit with data on balance of payments indicating continued narrowing to 4.5 percent of GDP in the 12-months to April 2019, from 5.5 percent recorded in April 2018.

The decline has been attributed to the resilient performance of exports particularly horticulture and coffee, strong diaspora remittances, and higher receipts from tourism and transport services. Growth of imports also slowed mainly due to lower imports of food.

There is an improving diaspora remittance, which has increased cumulatively by 3.8 percent in the Q1’2019 to USD 665.6 million from USD 641.5 million recorded in a similar period of review in 2018.

The rise in diaspora remittances is due to:

1. • 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 (CBK) has remained supportive with its activities in the money market, such as repurchase agreements and selling of dollars.

There are high levels of forex reserves, currently at an all-time high of USD 10.1 billion (equivalent to 6.4-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.