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Kenyan Shilling Lost 2.4% Against The Dollar In Q3

BY Soko Directory Team · October 4, 2021 09:10 am

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Kenya Shilling depreciated against the US Dollar by 2.4 percent in Q3’2021, to close at 110.5, from 107.9 shillings in Q2’2021, marking a 9-months low.

The Kenya Shilling depreciated against the US Dollar by 2.4 percent in Q3’2021, to close at 110.5, from 107.9 shillings in Q2’2021, marking a 9-months low.

The depreciation is partly attributable to increased import activities by local traders as well as increased dollar demand across various sectors including energy amidst weak inflows.

During the week, the Kenya Shilling depreciated marginally against the US Dollar by 0.1 percent to close at 110.5, from 110.4 the previous week.

Pressure on the shilling will continue coming 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 increased demand from merchandise traders as they beef up their hard currency positions in anticipation of more trading partners reopening their economies globally will pile pressure on the shilling.

The Rising global crude oil prices are on the back of supply constraints at a time when demand is picking up with the easing of COVID-19 restrictions and as economies reopen will also affect the shilling according to Cytonn Investments.

The shilling is however expected to be supported by the Forex reserves, currently at USD 9.4 billion (equivalent to 5.8-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.

In addition, the reserves were boosted by the USD 1.0 bn proceeds from the Eurobond issued in July 2021 coupled with the USD 407.0 mn IMF disbursement and the USD 130.0 mn World Bank loan financing received in June 2021.

The improving diaspora remittances evidenced by a 14.2% y/y increase to USD 312.9 mn in August 2021, from USD 274.1 mn recorded over the same period in 2020, which has continued to cushion the shilling against further depreciation.

Read More: Is There Hope For The Kenyan Shilling Against The Dollar?

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