The Kenyan shilling depreciated by 0.4 percent against the US dollar to close the week at 109.2 shillings from 108.7 shillings recorded the previous week.
The slight depreciation of the shilling was mainly due to increased dollar demand especially from the energy sector outweighing the supply of dollars from exporters.
On a YTD basis, the shilling has remained unchanged similar to the Kshs 109.2 recorded at the start of the year, in comparison to the 7.7 percent depreciation recorded in 2020.
“Despite the appreciation against the US Dollar for the better part of the year, we expect the shilling to remain under pressure for the remainder of 2021,” said experts from Cytonn in their latest report.
The shilling will continue receiving pressure from the rising uncertainties in the global market due to the Coronavirus pandemic, which has seen investors continue to prefer holding their investments in dollars and other hard currencies and commodities.
At the same time, the widened current account position increased by 0.2 percentage points to 5.4 percent of GDP in the 12 months to June 2021 from 5.2 percent of GDP for a similar period in 2020.
The demand from energy importers as they beef up their hard currency positions in the prevailing rise in global oil prices.
The shilling is however expected to be supported by the Forex reserves, currently at USD 9.3 bn (equivalent to 5.7 months of import cover), which is 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.
Improving diaspora remittances evidenced by a 6.0 percent y/y increase to USD 305.9 mn in June 2021, from USD 288.5 mn recorded over the same period in 2020, which has continued to cushion the shilling against further depreciation.
Read More: Kenyan Shilling Depreciates Against The Dollar at 103.6 During The Week