With strong dollar inflows from buyers of Treasury bonds, remittances by Kenyans in the Diaspora and hard currency inflows from horticulture exports, the Kenyan shilling strengthened to its strongest level in six months against the dollar.
At 9:49am (EAT), commercial banks quoted the shilling at 100.20/40 per dollar. This level was last recorded in September 2018, compared with 100.40/60 at Friday’s close.
Last week, Kenya’s Capital Markets Authority Kenya advised the country’s central bank to issue local-currency debt outside the country to check depreciation of the shilling, rather than managing the unit.
In October 2018, The International Monetary Fund reclassified the shilling from “floating” to “other managed arrangement” to reflect the currency’s limited movement due to periodic central bank interventions. It said the unit was overvalued by about 17.5 percent.
The strengthening of the local currency came even as some analysts warned that it remained exposed to weakness because of the current account and fiscal deficits.
Some have advised investors to buy Kenyan Eurobonds to mitigate against the expected weakness of the local currency.
Meanwhile, following its Monetary Policy Committee (MPC) meeting last week, the committee indicated that the shilling was well cushioned, noting that the country had adequate foreign exchange reserves amounting to 5.3 months of import cover.