The Kenyan shilling has held steady against the US dollar over the past one week due to a combination of an easing in the monetary policy stance and increased forex inflows.
Analysts say that the ttringent measures taken by Central Bank of Kenya on critical macro-economic variables, credit control and subsequent repeal of rates cap law, increased dollar account from remittances and control of foreign travel by state officials, have combined to boost the local unit.
Commercial banks quoted the shilling at 101.50/70 per dollar, the same as Tuesday’s close.
At the end of the last week, the Kenya Shilling appreciated by 1.0 per cent against the US Dollar to close at KSh 101.8, from KSh 102.8 recorded the previous week.
Dealers attribute this strengthening of the local unit to forex inflows from offshore investors buying government debt amid tight local currency liquidity conditions.
On a year to date basis, the Shilling has appreciated by 0.1per cent against the US $, in comparison to the 1.3per cent appreciation in 2018.
Analysts maintain that the Shilling should remain relatively stable against the greenback over the next three to six months.
Figures indicate that Kenya’s current account deficit improved by 11.8per cent during Q2’2019, coming in at KSh 107.6 Billion, from KSh 122.0 Billion in Q2’2018.
Diaspora remittances has increased cumulatively by 7.0per cent in the 12-months to October 2019 to US$ 2.8 Billion, from US$ 2.6 Billion recorded in a similar period in 2018.
Foreign capital inflows has also improved with investors looking to participate in the equities market. This trend will assist the local unit as CBK ups its activities in the money market, such as repurchase agreements and selling of dollars.
Figures indicate that the level of forex held within the monetary system is more than US$ 8.8 Billion, which is equivalent to 5.4-months of import cover.
On Tuesday this week, the Kenyan shilling was firm against the dollar on Tuesday supported by inflows from diaspora remittances and offshore investors buying stocks, traders said.
At 0647 GMT, commercial banks quoted the shilling at 101.30/50 per dollar, the same as on Monday.