The Kenyan currency depreciated on Tuesday to trade at 103.38 against the dollar. This was at its lowest since October 30 last year, when it exchanged at 103.40 to the greenback.
“The shilling has sold off to 103.50 and may eye 104 this quarter as uncertainty mounts on the back of coronavirus outbreak,” NCBA Bank Research Team says in their March monthly report.
Compared to the week ending Jan 13., the Shilling appreciated by 0.2% against the US Dollar to Kshs 102.4, from Kshs 102.6 recorded previously, due to reduced dollar demand from the merchandise traders.
On a Year To Date (YTD) basis, the shilling has depreciated by 1.0% against the dollar, in comparison to the 0.5% appreciation in 2019.
“In our view, the shilling should remain relatively stable against the dollar with a bias to a 2.4% depreciation by the end of 2020,” according to Cytonn Investments.
The Central Bank of Kenya (CBK) indicated that it’s going to purchase USD 400.0 mn from banks in the next four months, which will bolster the forex reserves that stood at USD 8.4 bn on 28th February 2020.
“The central bank’s move to increase its reserves could aggravate the selloff although the prospect of a standby facility with the IMF may help. Similarly, reduced export
earnings as markets shut, reduced remittances due to weakening labor markets and weaker capital inflows may hurt supply but possible donor support could limit the bleeding,” adds NCBA Research Team.
“Forex reserves have declined by USD 83Mn to USD 8.4Bn (5.11 months of import cover) since the January 2020 MPC meeting but continue to present an adequate cushion for the local unit in the short term and are adequate cover against external debt obligations (c. USD 3.1Bn) in 2020,” according to Genghis Capital.
