Shilling weakens slightly to US dollar

Business Daily Kenya:  The Kenya shilling exchange rate has remained relatively stable against major international and regional currencies ...

Business Daily Kenya: 

Payments. Photo/Courtesy

The Kenya shilling exchange rate has remained relatively stable against major international and regional currencies between January and June. It has strengthened against the Japanese Yen and weakened against the US dollar, the Euro and the Sterling Pound. Statistics from Central Bank of Kenya indicate the shilling has steadily lost ground by almost 1.12 per cent against the US dollar.

In the EAC region, the currency strengthened against the Rwandan and Burundi Franc but weakened against the Ugandan and Tanzanian Shilling. On January 1, 2017 the shilling exchanged at Sh102.5628 to a dollar, but this has depreciated further to Sh103.711.

Analysts in January predicted the pressure facing the shilling would dissipate due to the rise in foreign exchange inflows from remittances and charities, cushioning against the demand for dollars from oil importers.

According to CBK, foreign exchange reserves increased from $8.105 billion (Sh840 billion), equivalent to 5.36 months of import cover, to $8.259 billion (Sh856 billion) or 5.46 months of cover as at May.

Analysis done by Cytonn Investments indicates that on a year-to-date basis, the shilling has depreciated against the dollar by 1.2 per cent in the six-month into 2017 compared to 0.2 per cent decline noted in 2016.

Cytonn Investment Manager Maurice Oduor said the slight decline of 0.1 per cent in 2016 was due to global strengthening of the dollar owing to the Fed rate hike and Brexit which saw increased uncertainties in the global forex market prompting CBK to use forex reserves to support the shilling.

He predicted the shilling will depreciate against the dollar driven by continued global strengthening of the dollar as the Fed increase their rate hiking cycle in 2017 and recovery of global oil prices.

“The Kenya Shilling depreciation against the dollar has been formed by increased dollar demand from oil importers and a globally strengthening dollar,” Oduor said.

However, he said, the US Fed has since increased the base rate and indicated possible rate hikes during the year, sighting increase in inflation rate, in tandem with wages increase and the continued improvement in investor confidence.

“On a year to date basis, the shilling has depreciated against the dollar by 1.2 per cent as the CBK continues to support the shilling as witnessed by the slight decline in the forex reserves over the months,” he said.

Sterling Investment Capital Director John Kirimi says the shilling should remain relatively stable in the short term due to the forex reserve level currently at $8.1 billion (Sh840.8 billion) (equivalent to 5.4 months of import cover) and IMF precautionary credit facility of $1.5 billion (Sh155.7 billion) and increased diaspora remittances.

The post Shilling weakens slightly to US dollar appeared first on Mediamax Network Limited.

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