The Kenya shilling slightly strengthened beginning of the week compared to closing Friday, days after foreign exchange reserves increased.
The Central Bank of Kenya (CBK) showed the shilling traded at an average of 100.15 units to the dollar on Monday while Reuters data showed it at 100.30 in early on Tuesday. Forex reserves rose by $60 million or Sh6 billion last week to stand at $8.136 billion or Sh816.04 billion. The unit had closed at 100.31 to the greenback last Friday.
The new level of reserves represented 5.33 months of import cover compared to the previous week’s $8.076 billion or Sh810.02 billion, which was equivalent to 5.29 months of similar cover.
Besides the strong reserves, market analysts said inflows and low dollar demand was responsible for the stronger shilling.
“The shilling strengthened against the US dollar by 0.5 percent…This was boosted by strong dollar inflows against lower importers’ demand for the hard currency. Usable foreign exchange reserves held at the central bank surged by $60 million to $8.14 billion (equivalent to 5.33 months of import cover),” said Kingdom Securities.
Dyer & Blair Investment, however, said there might be some weakness as the year progresses due to pressure from foreign currency-denominated loans, such as the $750 million or Sh75 billion sovereign bond that is set to mature in June.
“We remain cautious on the shilling over the medium term given Kenya’s significant foreign currency debt maturities, tightening of global monetary policy and rising concerns of an economic recession in (the) US and China,” said Dyer & Blair.