The Kenyan currency closed the week appreciating marginally at Ksh 105.91 per US dollar on April 16 compared to Ksh 106.00 on April 9.
The Central Bank of Kenya (CBK) in its weekly bulletin said this was “relatively stable against major international and regional currencies” however, analysts are of the view that it would likely come under pressure as the dollar buying continues amid higher demand from foreign investors.
During the week, the shilling weakened against the Sterling pound to exchange at KSh 132.23 against KSh 130.80 and the Euro to exchange at KSh 115.52 compared to KSh 115.11 the previous week.
“The Kenya Shilling has depreciated by 4.3 per cent Year to Date ( YTD), in comparison to the 0.5 per cent 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,” Analysts from Cytonn Investments project.
They attribute this to the rising uncertainties in the global market due to the Coronavirus outbreak, which has seen the disruption of global supply chains.
In addition, the shortage of imports from China for instance, which accounts for an estimated 21.0% of the country’s imports, “is likely to cause local importers to look for alternative import markets, which may be more expensive and as such higher demand for the dollar from merchandise importers.”
“We have switched our outlook on 2020 macroeconomic environment from positive to negative depending on how fast the Coronavirus is contained,” the analyst state.
However, the shilling is expected to be supported by: high levels of forex reserves, currently at USD 7,913 million (4.78 months of import cover) at April 16 and, CBK’s supportive activities in the money markets.