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January 20, 2019

Kenyan Shilling closed 2018 strongest in EAC

The new generation coin of 20 shillings coin after the Central Bank commenced the distribution of the new generation coinage after it was issued through a gazette notice in November last year. January 8, 2018. Photo/Jack Owuor
The new generation coin of 20 shillings coin after the Central Bank commenced the distribution of the new generation coinage after it was issued through a gazette notice in November last year. January 8, 2018. Photo/Jack Owuor

The Kenyan shilling firmed by 1.4 per cent against the US dollar as at the end of 2018, a stronger position compared to a similar period in 2017.

It was the only major African currency that appreciated against the dollar. 

Investment firm Cytonn in its 2018 market review  reports  that the shilling closed at 101.8 in December 2018 compared to 103.2 in December 2017.

This was despite the strengthening of the dollar in the global markets mainly due to the trade war between China and the USA that put pressure on emerging market currencies.

The Nigerian Naira, Ugandan and Tanzanian shilling, Mauritius Rupee and South African Rand depreciated by 0.7, 1.8, 2.9, 2.2 and 15.9 per cent respectively.

The underperformance of regional currencies was further attributed to the tightening of monetary policy which saw the US Federal Reserve raise the benchmark interest rate to close the year at a range of 2.25per cent - 2.5 per cent.

The shilling has been fluctuating with Central Bank quoting an average of 102.09.

Cytonn projected the shilling to remain stable due to narrowing of the current account deficit to 5.3 per cent in the 12 months to September 2018, compared to 6.5 per cent in September 2017.

This coupled by consistent trends in increasing diaspora remittances which rose by 42.5 per cent to Sh224 billion ($2.2 billion) during the first 10 months from Sh163 billion ($1.6 billion) over the same period.

Revenue from principal exports including coffee, tea and horticulture increased by 5.2 per cent for the first nine months of 2018 to Sh209 billion from Sh199 bilion over the same period in 2017.

Accoring to the report, the narrowing of the current account deficit is largely due to increased exports of tea and horticulture.

It further attributes his to  increased diaspora remittances, strong receipts from tourism, and lower imports of food and Standard Gauge Railway -related equipment relative to 2017.

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