- The shilling was last at this level in May last year.
- Last week, CBK issued another Sh30 billion bond whose results are expected to be released Thursday.
Kenya’s currency strengthened to a 14-month high against the dollar buoyed by steady forex inflows largely diaspora remittances and foreign investors chasing yields from a tax-free infrastructure bond auctioned last week.
The Google currency tracker mapped the shilling at 106.54 against the greenback on Monday at 1530 hours compared to 106.98 on Friday. This was however, a slight drop compared to Sunday when the shilling briefly sneaked into 105 margin to exchange at 105.87.
The shilling was last at this level in May last year.
Although the regulator hinted that the shilling is on the appreciating trend, it did not give reason.
However, money market experts have attributed the growth to several factors including forex inflows from diaspora remittances, agricultural exports and loan disbursements from the International Monetary Fund (IMF).
According to a weekly bulletin by the Central Bank of Kenya, usable foreign exchange reserves remained adequate at $7.6 billion or 4.63 months of import cover as at May 6. The steady growth in money sent by Kenyans working abroad is attributed to easing Covid-19 restriction measures.
Data from CBK shows that foreign remittances in the first three months of this year amounted to $829 million, the highest amount sent in any quarter. The funds were 17 per cent per cent higher than the remittances in the first quarter of 2020.
Kenya’s foreign exchange reserves stood at $7.425 billion by April 8, equivalent to 4.56 months of import cover and the highest since March 4, according to central bank data.
“We could see further gains toward 105, but should be succeeded by a slow grind upwards,” said Ruth Mbewa, money market expert at BIM consultants.
She added that besides diaspora remittances and receipts from agricultural exports especially horticulture, IMF cash has been trickling in as the country moves towards closing it 2020/21 books.
The IMF approved on April 2 a three-year $2.34 billion financing package for Kenya, with an immediate disbursement of about $307.5 million.
‘’That cash, coupled with foreign inflows for an infrastructure bond that raised Sh81.9 billion ($766 million), have cushioned the local currency,’’ she said.
The National Treasury exceeded its target from the April infrastructure bond (IFB) issue by Sh21.9 billion.
The government had targeted Sh60 billion from the bond, but after getting Sh88.6 billion bids from investors, took up Sh81.9 billion. The 18-year bond will pay investors an average of 12.67 per cent.
Last week, CBK issued another Sh30 billion bond whose results are expected to be released Thursday.
Others however thinks that the Kenyan shilling is benefitting from low dollar demand globally.
Wall Street analysts expect the global supply of a vaccine against coronavirus to send the dollar sinking as confidence returns to the global economy.
Latest survey by IMF shows that the share of US dollar reserves held by central banks fell to 59 per cent—its lowest level in 25 years—during the fourth quarter of 2020.
Some analysts say this partly reflects the declining role of the US dollar in the global economy, in the face of competition from other currencies used by central banks for international transactions.