Since the advent of Covid-19, the Kenyan shilling has been under pressure from both the US dollar and the pound.
Despite the local currency remaining resilient against the giants such as the dollar, the depreciation has been sending some chills down the spines of some stakeholders.
The month of August was not that friendly to the shilling. According to a report compiled by Cytonn Investments, the shilling shed off 0.5 percent during the month of August to end the month at 108.2 shillings from 107.7 shillings recorded in July.
“The depreciation during the month was as a result of increased importer dollar demand amid lackluster dollar inflows,” said Cytonn Investments in their latest report for the month of August.
As the week came to an end, the shilling remained unchanged against the US dollar at 108.2 shillings, the same rate it held the previous week.
“On a year-to-date basis, the Kenyan shilling has depreciated by 6.3 percent against the dollar compared to 0.5 percent appreciation in 2019,” Cytonn added.
It is expected that as the economy begins to slowly return to normal, the local currency will start smiling again, especially after traders begin to sell the goods that had been held in stores due to Covid-19 restrictions.
The current high levels of forex reserves will shield the local currency in the short-term. Currently, the reserves are at 8.9 million dollars, an equivalent to 5.4 months import cover.
The Forex reserves are also above the statutory requirement of maintaining at least 4 months of import cover and the EAC region’s convergence criteria of 4.5 months of import cover.
There is also a relatively strong diaspora remittance that increased by 23.4 percent to 277 million dollars in July 2020 compared to 225 million dollars in July 2019.
As the month of September begins to take shape, all eyes are now on the shilling to see if it will take advantage of the restriction relaxation to bloom.