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Shilling Sees A Glim After Days Of Depreciation

BY Soko Directory Team · August 24, 2020 08:08 am

Last week, the Kenyan Shilling appreciated by 0.3 percent against the US Dollar to close the week at 108.0 shillings, from 108.3 shillings, recorded the previous week.

Since the advent of Covid-19, the local currency has been on the receiving end against the US Dollar as well as the pound.

The slight appreciation, according to a report compiled by Cytonn Investments, was attributable to slower dollar demand from oil and merchandise importers.

On a YTD basis, the shilling has depreciated by 6.6 percent against the dollar, in comparison to the 0.5 percent appreciation in 2019.

According to experts from Cytonn, Kenyan shilling will continue being under pressure in the coming days as the Central Bank of Kenya looks for ways to shield it.

There is a continuous demand from merchandise and energy sector importers as they beef up their hard currency positions, heaping more pressure on the shilling.

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Currently, there is a deteriorating current account position, with the current account deficit deteriorating by 10.2 percent during Q1’2020, to 110.9 billion shillings, from 100.6 billion shillings recorded in Q1’2019 attributable.

The deteriorating current account is due to:

0% decline in the secondary income balance (transfers recorded in the balance of payments whenever an economy provides or receives goods, services, income or financial items), to Kshs 124.1 bn, from Kshs 128.0 bn in Q1’2019, and,

A 67.0% decline in the services trade balance (the difference between the imports and exports of services) to Kshs 20.4 bn, from Kshs 61.9 bn.

The money markets remained liquid during the week, despite the average interbank rate increasing to 2.6 percent, from 1.9 percent recorded the previous week, mainly supported by government payments and maturing TADS of 811.0 billion shillings.

TADs are used when the securities held by the CBK for Repo purposes are exhausted or when CBK considers it desirable to offer longer tenor options.

The average interbank volumes increased by 12.2 percent to 13.8 billion shillings, from 12.3 billion shillings recorded the previous week. The commercial banks’ excess reserves came in at 23.2 billion shillings.

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Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system. Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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