The Kenya Shilling appreciated by 0.7 percent against the US Dollar during the month of October to 103.2 shillings from 103.9 shillings at the end of September.
According to Cytonn Investments, the local currency was supported by inflows from diaspora remittances and portfolio investors buying government debt.
During the week, the Kenya Shilling remained stable against the US Dollar to close at 103.3 shillings which were similar to the value recorded in the previous week.
On a YTD basis, the shilling has depreciated by 1.4 percent against the US Dollar, in comparison to the 1.3 percent appreciation in 2018.
The shilling is still enjoying the glory of 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 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.
This 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 remittance, which have increased cumulatively by 8.0 percent in the 12-months to September 2019 to USD 2.8 billion from USD 2.6 billion recorded in a similar period of review in 2018 due to:
- 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 of its activities in the money market, such as repurchase agreements and selling of dollars.
There are 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.