Kenya Shilling Expected to Remain Under Pressure This Year

Nairobi — The Kenya shilling is expected to remain under pressure this year, with financial analysts attributing this to several reasons among them rising uncertainties in the global market due to the ongoing coronavirus pandemic.

Experts from Cytonn Investments say the uncertainties have already seen investors continue to prefer holding their investment in dollars.

The shilling will also continue being under pressure due to the continued strengthening of the US dollar against major currencies.

"Continued strengthening of the US Dollar against major currencies as evidenced by a YTD gain of 2.1 percent in the ICE U.S. Dollar Index as compared to a 6.7 percent decline in 2020. The ICE U.S. Dollar Index is a benchmark index that measures the international value of the US Dollar where investors can monitor the value of the US Dollar relative to a basket of six other world currencies," the analysts said.

However, the analysts note that the local unit is, however, expected to be supported by forex reserves and the EAC region's convergence criteria of 4-5 months of import cover.

The analysts however note that forex reserves have been declining, which means that the government could struggle to support the local currency when it depreciates.

Other factors expected to support the shilling include improving current account position, as well as growing Diaspora remittances.

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