Kenyan Shilling Remains Stable, Beats January Odds

The Kenya Shilling appreciated by 0.7 percent against the US dollar during the month of January to 100.6 shillings from 101.3 shillings at the end of December.

The marginal appreciation of the local currency during the month of January according to Cytonn Investments was mostly supported by inflows from tourism and diaspora remittances amid slow demand from importers.

During the week, the Kenyan Shilling appreciated against the US Dollar by 0.3 percent to close at 100.6 shillings from 100.9 shillings recorded in the previous week.

The shilling has appreciated by 0.7 percent against the dollar, in comparison to the 0.5 percent appreciation in 2019.

The shilling continues to enjoy the narrowing of the current account deficit, with preliminary data indicating that Kenyans current account deficit was equivalent to 4.6 percent of GDP in 2019, from 5.0 percent recorded in 2018.

This was majorly driven by lower imports of SGR related equipment, resilient diaspora remittances which accumulatively stood at USD 2.8 billion in December 2019, a 3.7 percent increase from the USD 2.7 billion recorded in December.

This was also as a result of strong receipts from transport and tourism services with preliminary data indicating that the number of tourists landing in the country stood at 132,019 in the month of December, which was a 9.0 percent increase compared to the 121.070 recorded in November 2019.

“In our view, the shilling should remain relatively stable against the dollar in the short term with a bias to 2.4 percent depreciation by the end of 2020,” said Cytonn Investments.

There are high levels of forex reserves, currently at USD 8.5 billion above the statutory requirement of maintaining at least 4.0 months of import cover. And the EAC regions convergence criteria of 4.5 months import cover.

The shilling continues to be shielded by foreign capital inflows, with investors looking to participate in the domestic equities market. The Central Bank of Kenya (CBK) has remained supportive