Kenyan Shilling Slumps To An All-Time Low On Tuesday

As cases of Covid-19 continues to spike across the country, the Kenyan shilling seems to be on the receiving end, this down dropping to an all-time low by close of business on Tuesday.

On Tuesday, the local currency closed the day at 107.9 to the US Dollar, a drop that was attributed to the end of month dollar demand. Companies have increased demand for dollars as foreign reserves decline.

According to data compiled by Bloomberg, a drop closer at that level would be lowest the Kenyan shilling has ever dropped since December 1988. Analysts say the shilling is likely to have some leeway at the beginning of August.

Last week, the Kenya Shilling depreciated by 0.5 percent against the US Dollar to close the week at 107.5 shillings from 106.9 shillings, recorded the previous week.

The slight depreciation was attributable to increased dollar demands from importers as global economies continued easing movement restrictions.

On a YTD basis, the shilling has depreciated by 6.0 percent against the dollar, in comparison to the 0.5 percent appreciation in 2019.

According to Cytonn Investments, the shilling will continue getting pressure from the demand from merchandise and energy sector importers as they beef up their hard currency positions amid a slowdown in foreign dollar currency inflows.

The shilling is however expected to be supported by the high levels of forex reserves, currently at USD 9.7 billion 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.

There is an improving diaspora remittance evidenced by the 24.0 percent increase to USD 258.2 million in May 2020, from USD 208.2 seen the previous month, mainly due to the improvements in economic activities globally, as countries abroad eased their coronavirus restrictions.

In terms of y/y performance, diaspora remittances increased by 6.2 percent to USD 258.2 million in May 2020, from USD 243.2 million recorded in May 2019.

As cases of Covid-19 continues to rise in Kenya, the Kenyan shillings has remained under attack from major currencies such as the pound and the US dollar.

READ: Kenyan Shilling Sheds 0.5% On Increased Dollar Demand