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Kenyan Shilling Sheds Off 0.7% In July To End At Ksh 108.6

BY Soko Directory Team · August 2, 2021 02:08 pm

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The Kenyan shilling depreciated by 0.4 percent against the US dollar to close the week at 108.6, from 108.2 shillings recorded the previous week.

Kenya Shilling depreciated by 0.7 percent against the US Dollar to close the month at 108.6 shillings, from 107.9 shillings recorded at the end of June 2021, mostly attributable to increased dollar demand from general importers in July.

During the week, the Kenyan shilling depreciated by 0.4 percent against the US dollar to close the week at 108.6, from 108.2 shillings recorded the previous week.

The performance of the shilling last week was partly attributable to the build-up of dollar demand from energy importers as they meet their end of the month hard currency obligations.

On a YTD basis, the shilling has appreciated by 0.5 percent against the dollar, in comparison to the 7.7 percent depreciation recorded in 2020.

Pressure on the shilling will come 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.

The widened current account position which 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 will continue piling pressure on the local currency.

At the same time, the demand from merchandise traders as they beef up their hard currency positions in anticipation of more trading partners reopening their economies globally will have pressure on the shilling.

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% 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 Sheds Off 0.2% Against The US Dollar

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