The Kenyan Shilling has gained against the US dollar by 0.3% to close at Sh100.5 last week, up from Sh100.7 the previous week.
This, according to Cytonn investments’ report was supported by inflows from diaspora remittances amidst tightened liquidity in the money markets.
“The Kenyan shilling has gained by 2.6% year to date, and in our view the shilling should remain relatively stable against the dollar in the short term,” the rport read in part.
Some of the reasons the shilling has gained against the dollar include:
Narrowing of the current account deficit: The narrowing of the current account deficit, to 8.9% of GDP in Q1’2018 compared to 11.3% in Q1’2017 on account of the faster growth of exports at 7.1%, compared to imports growth of 6.5%,
Stronger inflows: From principal exports, which include coffee, tea and horticulture, which increased by 9.3% during the month of April to Kshs 21.9 bn from Kshs 20.0 bn in a similar period the previous year, with the exports from coffee and horticulture increasing by 6.7% and 25.0% y/y, respectively, while tea exports have declined marginally by 1.6% y/y,
Diaspora remittances: Improving diaspora remittances, which increased by 16.9% to USD 253.7 mn in May 2018, from USD 217.1 mn in April 2018, with the largest contributor being North America at USD 122.8 mn attributed to (a) recovery of the global economy, (b) increased uptake of financial products by the diaspora due to financial services firms, particularly banks, targeting the diaspora, and (c) new partnerships between international money remittance providers and local commercial banks making the process more convenient, and,
Forex reserves: High forex reserves, currently at USD 8.8 bn (equivalent to 5.9 months of import cover) and the USD 1.5 bn stand-by credit and precautionary facility by the IMF, still available until September 2018.
