Shilling Holds Strong Against The Dollar During The Week

The Kenyan shilling has maintained stability against the US Dollar despite the speculations of it being on the receiving end during the week.

According to a report released by Cytonn Investments, the Kenya Shilling remained stable against the US Dollar to close the week at 103.8 shillings, unchanged from the previous week.

The stability of the shilling has been attributed to the inflows from offshore investors buying government securities and liquidity in the local market.

On a YTD basis, the shilling has depreciated by 1.9 percent against the dollar, in comparison to the 1.3% appreciation in 2018.

“In our view, the shilling should remain relatively stable against the dollar in the short term,” said Cytonn.

The shilling continues to enjoy the narrowing of the current account deficit, with preliminary data indicating that Kenya’s current account deficit improved by 11.8 percent during Q2’2019.

The current deficit is at a deficit of 107.6 billion shillings from 122.0 billion shillings in Q2’2018, equivalent to (6.2 percent) of GDP, from (7.6 percent) recorded in Q2’2018.

The deficit was mainly driven by the narrowing of the country’s merchandise trade deficit by 1.7 percent and a rise in secondary income (transfers) balance by 5.1 percent.

There is improving diaspora remittances, which have increased cumulatively by 8.9 percent in the 12-months to August 2019 to USD 2.8 billion from USD 2.6 billion recorded in a similar period of review in 2018.

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

There are also high levels of forex reserves, currently at USD 9.0 billion (equivalent to 5.6-months of import cover), above the statutory requirement of maintaining at least 4.0-months of import cover, and the EAC region’s convergence criteria of 4.5-months of import cover.