US dollars and Kenya shilling at a forex bureau in Nairobi. FILE PHOTO | NMG
Kenya shillings bucks trend with gains on the US dollar
The Kenya shilling is the only one amongst major frontier and emerging markets currencies that appreciated in the first half of the year, a Citigroup analysis shows.
The local unit gained two per cent while the other currencies depreciated or remained at nearly the same level – for Argentina and Oman. The appreciation was in line with improvement on Kenya’s current account deficit as well as the overall balance of payments position.
Analysts have identified the major causes of the improvement in the shilling’s value – and hence the deficit and balance of payment positions – as linked to the sharp rise in remittances and the crediting of Sh200 billion ($2 billion) into Kenya government accounts following the conclusion of a new Eurobond.
“Aside from the Argentine peso, many other frontiers and emerging currencies have weakened versus the US dollar during the year (exception: Kenya shilling, which strengthened two per cent year to date). This resulted in some modest currency losses,” said Citi.
Kenya’s overall balance of payment surplus nearly tripled in the first three months of the year to Sh206.9 billion from Sh54.21 billion in the previous quarter as the financial account benefited from the Eurobond raised in March.
The losses were bigger for emerging markets where the currencies weakened by 3.8 percentage points than for the frontier ones where the units weakened by 0.65 percentage points.