Kenyan Shilling Strengthens on Slowing Demand for Foreign Currency

Kenyan shilling strengthened against the US dollar closing at  KSh 100.90 per US Dollar on December 19, compared to KSh 101.50 on December 11.

The Central Bank of Kenya (CBK) in its weekly bulletin said this was attributed to inflows amid slowing demand for foreign currency ahead of the festive season.

Data from Cytonn Investments, on a YTD basis, the shilling has appreciated by 1.1% against the dollar, in comparison to the 1.3% appreciation in 2018.

“In our view, the shilling should remain relatively stable against the dollar in the short term,” they note.

This will be supported by the improving diaspora remittance of which the cumulative inflows in the 12-months to November 2019 increased to USD 2,790 million compared to USD 2,658 million in November 2018, reflecting a growth of 5.0 percent.

High levels of forex reserves, currently at USD 8,898 million (5.47 months of import cover) as at December 19.

“This meets the CBK’s statutory
requirement to endeavour to maintain at least 4 months of import cover, and the EAC region’s convergence criteria of 4.5 months of import cover,” according to CBK.