Kenyan shilling depreciates largely due to increased demand from oil importers

The Kenyan shilling depreciated slightly against the US Dollar during the week to close at Kshs 103.3, from Kshs 103.2 recorded the previous week.

The Kenya Shilling depreciated slightly against the US Dollar (USD) during the week to close at Kshs 103.3, from Kshs 103.2 recorded the previous week.

In a market insights report by Cytonn Investments, a private equity investment company, based in Kenya, the depreciation was largely due to increased demand from oil importers, with any further depreciation being cushioned by diaspora remittances and horticulture revenue.

The report further notes that on a year to date basis, the shilling has depreciated against the dollar by 0.8%.

Cytonn expects the shilling to remain relatively stable against the dollar in the short term, supported by the weakening of the USD in the global markets as well as increased diaspora remittances that grew by 5.3% to $ 1 bn in 7 months to July 2017 from $ 987.2 mn over a similar period last year.

The CBK’s activity is also seen a key factor in maintaining a stable shilling as they have sufficient forex reserves, currently at $ 7.4 bn (equivalent to 4.9 months of import cover).

The key factor to watch is the current account deficit that worsened to 6.2% of GDP in Q2’2017, as compared to 5.3% of GDP in a similar period last year.

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