The Kenyan Shilling shed off 0.5 percent against the US Dollar in the first half of 2019 but still resilient.
A report released by Cytonn Investments Limited showed that the local currency closed the first half of 2019 at 102 shillings to the dollar from 101.8 shillings as at December 2018.
The slight depreciation of the shilling against the US Dollar has been attributed to the increased demand in dollar by oil importers.
Last week, the shilling depreciated marginally by 0.4 percent against the US Dollar to close the week at 102.3 shillings from 101.9 shillings the previous week.
The slight depreciation of the shilling during the week has been attributed to the end-month demand from the energy and manufacturing sector exceeding dollar inflows from remittances.
“In our view, the shilling should remain relatively stable to the dollar in the short term,” said analysts from Cytonn Investments.
The Kenyan 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 slight decline in the current account deficit 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 slowed mainly due to lower imports of food and SGR construction equipment.
There is an improving diaspora remittances, which have increased cumulatively by 3.8 percent in May 2019 to USD 1.2 bn, from USD 1.1 billion recorded in a similar period of review in 2018.
The Central Bank of Kenya has remained supportive with its activities in the money market, such as repurchase agreements and selling of dollars that have shielded the shilling.
Currently, there are high levels of forex reserves, currently at USD 9.2 billion (equivalent to 5.8-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.