Kenyan Shilling Holds Ground Against The US Dollar

Last week, the Kenyan shilling remained unchanged against the US dollar, to close at 108.5 shillings similar to what was recorded the previous week.

On a YTD basis, the shilling has depreciated by 7.1 percent against the dollar, in comparison to the 0.5 percent appreciation in 2019.

The local currency is set to be supported by the high levels of forex reserves, currently, at USD 8.5 million (equivalent to 5.1-months of import cover).

The current forex reserves are 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 shilling is also enjoying the support of relatively strong Diaspora remittances that increased by 27.9 percent to USD 274.1 million in August compared to USD 214.3 million in August 2019.

This is despite being 1.0 percent lower than the USD 277.0 million in July 2020, leading to the narrowing of the country’s current account deficit to 4.7 percent of GDP in the 12 months to August 2020, similar to the level in July.

READ: Yield On Kenyan Eurobonds Dip As Investor Confidence Returns

Kenyan Eurobonds

The yields on all Eurobonds decreased during the week, pointing to improved investor sentiment and the perception of reduced risk by foreign investors on the country’s outlook.

During the week, according to Reuters, the yield on the 10-year Eurobond issued in June 2014 declined by 0.9% points to 5.5 percent, from 6.4 percent recorded the previous week.

During the week, the yields on the 10-year and 30-year Eurobonds both declined by 0.6 percentage points and 0.4 percentage points, respectively, to close at 6.8 and 8.3 percent respectively, from the 7.4 and 8.7 percent recorded the previous week.

During the week, the yields on the 7-year and 12-year Eurobonds both declined by 1.0 and 0.7 percent, respectively to close at 6.4 and 7.4 percent from the 7.4 and 8.1 percent recorded the previous week.

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