Shilling Still Maintaining At 105.1 Against The US Dollar

The Kenya Shilling remained unchanged against the US Dollar during the week, closing at 105.1 shillings according to a report for the week released by Cytonn Investments.

On a YTD basis, the shilling has depreciated by 3.7 percent against the dollar, in comparison to the 0.5 percent appreciation in 2019.

The shilling faces an unknown future given the rising uncertainties in the global market due to the Coronavirus outbreak, which has seen the disruption of global supply chains.

The shortage of imports from China for instance, which accounts for an estimated 21.0 percent of the country’s imports, is likely to cause local importers to look for alternative import markets, which may be more expensive and as such higher demand for the dollar from merchandise importers.

There is a prevailing subdued diaspora remittances growth following the close of the 10.0 percent tax amnesty window in July 2019.

“We also foresee reduced diaspora remittances, owing to the decline in economic activities globally hence a reduction in disposable incomes. This coupled with increased prices of household items abroad might see a reduction in money expatriated into the country,” said Cytonn.

The shilling is however expected to be supported by high levels of forex reserves, currently at USD 8.0 million  (equivalent to 4.8-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.

The Central Bank of Kenya (CBK) has remained supportive of its activities in the money markets, with the Central Bank of Kenya (CBK) having already indicated that it’s looking to purchase USD 400.0 mn from banks for four months beginning from March to bolster the forex reserves.

READ: Kenyan Shilling Slightly Dips But Still Resilient Against The Dollar