- The shilling last Friday strengthened to eight-and-a-half month-high against the US dollar.
- The Kenyan currency was averaging 107.30 units against the dollar in Friday trade compared with 108.60 units at the close of Tuesday.
The shilling last Friday strengthened to eight-and-a-half month-high against the US dollar, with traders linking this on strong inflows from foreign investors who oversubscribed to State’s Sh60 billion infrastructure bond.
The Kenyan currency was averaging 107.30 units against the dollar in Friday trade compared with 108.60 units at the close of Tuesday, marking the 12th straight day of gaining ground to the dollar.
This is the strongest level since July 16 when it was at 107.36 and has come despite Central Bank of Kenya (CBK) foreign exchange reserves opening the month at a three-year low of Sh802.6 billion ($7.343 billion) or 4.51 months import cover.
Traders said foreign investors showed increased interest in the tax-free infrastructure bond in which the State netted Sh81.9 billion— representing a 147.6 per cent performance rate for the bond.
The local currency was also enjoying support from muted foreign currency demand due to reduced dividend repartition and strong remittances partly on Valentine’s Day flower exports receipts.
A sustained strengthening of the Kenyan currency raises the prospects of softening living costs in a country that largely depends on imports for its consumer and capital goods, especially fuel and industrial raw materials.
The country imports a wide variety of goods, including petroleum products, wheat, second-hand clothes, motor vehicles, vegetable oils and industrial machinery.
CBK data showed remittances hit $260.3 million last February, being 11.4 per cent higher than the preceding similar period and is estimated to be stronger this year on gradual economic recovery.
Kenya’s foreign exchange reserve had touched 4.51 months import cover, being just 0.01 percentage points above the East African Community’s convergence criteria of 4.5 months of import cover.
However, the reserves are set for a boost with Kenya expecting Sh33.28 billion ($307.5 million) from the International Monetary Fund as part of the 38-month loan valued at $2.34 billion (Sh253.3 billion) for the Covid-19 pandemic response and to address the country’s debt vulnerabilities.
Kenya shilling had touched an all-time low of 111.59 to the dollar on December 17 last year — being 8.95 per cent weaker since the country reported the first case of the infectious virus.
The local currency had come under pressure as demand for dollars surged in a period that had seen the supply of dollars get squeezed by a lack of tourists and a reduction in exports of other commodities.
The shilling recorded a sharp decline from July last year when the State started relaxing Covid-19 control measures such as curfew hours and flights ban, revving up dollar demands by importers.