Shilling outperforms most African currencies since start of 2016

What you need to know:

The Kenya shilling has outperformed the majority of other African currencies in their exchange rate to the dollar since the beginning of the year.
The shilling’s stable opening to the year has been brought about by benign dollar demand in the market, as well as balanced liquidity that has reduced volatility.
Economists have projected a stable first half of the year for the shilling, with reduced import side pressure due to the falling oil price and better prospects for tourism and agriculture inflows.

The Kenya shilling has outperformed the majority of other African currencies in their exchange rate to the dollar since the beginning of the year.

The currency has appreciated to the dollar by 0.5 per cent in the year-to-date exchanging at 101.89 as per the Central Bank of Kenya (CBK) indicative rate, making it the only East African currency rising against the dollar this year.

The shilling’s stable opening to the year has been brought about by benign dollar demand in the market, as well as balanced liquidity that has reduced volatility.

Bruising losses

Data from respective central banks shows that the currencies of Tanzania, Uganda, Rwanda and Ghana are all weaker to the dollar this year, while the South Africa Rand is only beginning to recover after months of bruising losses to the dollar. Nigeria has been running a fixed exchange-rate policy since last year.

Economists have projected a stable first half of the year for the shilling, with reduced import side pressure due to the falling oil price and better prospects for tourism and agriculture inflows.

“The falling import cost of oil will help, and other than infrastructure capital imports other import categories are trending sideways. The CBK has also boosted its reserves well and will provide support if needed,” said CfC Stanbic economist Jibran Qureishi in a presentation of the firm’s 2016 economic outlook report.

ALSO READ: Businesses see shilling staying stable in the first half

The Ugandan shilling is down one per cent in the year-to-date exchanging at 3,410 units to the dollar, while the Tanzanian shilling is down 1.4 per cent at 2,180 units.

The Rwanda Franc is 1.6 per cent down to the dollar at 759 units, while in West Africa, the Ghana Cedi has depreciated by 2.7 per cent to the dollar exchanging at 3.88 units.

The rand, which has several times slipped below its key psychological level of 16 units to the dollar in recent months, has rallied slightly on weak dollar demand in South Africa to appreciate by 1.8 per exchanging at 15.75 units.