Although the Kenya Shilling exchange rate against the US dollar and other hard currencies has exhibited relative stability since this year begun, this trend is likely to change.
The Kenyan shilling was stable against the dollar on Wednesday mainly due to what dealers said was low demand for hard currency from importers.
Commercial banks quoted the Kenya Shilling at 101.25 buying and 101.45 selling, compared to 101.15 buying and 101.35 selling against the greenback at Tuesday’s close.
“The Kenya Shilling has been strong against the greenback, largely supported by high forex reserves coming from diaspora remittances as well as proceeds from the Eurobond,” said Mr David Ngugi, an analyst at Cytonn Investments.
He added that it 2020, the fundamentals that have supported the Kenya Shilling in the past year will change significantly.
“While the Government had scrapped the 10 per cent tax on remittances from diaspora, this window has since been shut. There are also huge financial commitments such as repayment of the SGR loans to China,” said Mr. Ngugi.
The ongoing escalation of political tensions and military actions in the Middle East between USA and Iran could also push up crude oil prices and Kenya’s Import bill and worsen its Balance of Payments position. “The happenings in the Middle East going forward affects how the Kenya Shilling behaves,” said Mr Ngugi.
A weekly report from Central Bank of Kenya, ended 3rd January 2020 shows that the Kenya Shilling has remained relatively stable against major international and regional currencies.
It exchanged at KSh 101.34 per US Dollar on January 2, compared to KSh 100.63 on December 24, 2019 reflecting increased corporate demand.
Foreign Exchange reserves stood at US$ 8,758 million (5.4 months of import cover) as at January 2nd, 2020.
