The US Dollar has lost its grip against the Kenya Shilling after it opened the week at 139 units low.
This is compared to last Friday, when it closed at 142 units.
It represents a 2.1% gain the local currency has made in two days to March 11 when it traded at 142 units.
The shilling has gained strength by 2.79 percentage point over the past 14 days as investors gain confidence in the local market.
The Kenya Shilling gained against the US Dollar by 0.5%, to close at Ksh.142.8, from Ksh.143.5 recorded the previous week.
Return of Investors in Market
The shilling is being supported by the return of investors into the local credit market – witnessed by oversubscribed Treasury Bonds.
Over the past week, the Central Bank of Kenya (CBK) released the auction results for the re-opened bond with a tenor to maturity of 2.9 years and a fixed coupon rate of 18.4%.
Last week’s bonds were oversubscribed with the overall subscription rate coming in at 107.7%, receiving bids worth Ksh.43.1 billion against the offered Ksh.40.0 billion.
CBK accepted bids worth Ksh.34.3 billion, translating to an acceptance rate of 79.6%.
The weighted average yield of accepted bids came in at 18.42%, only 3.7 bps above the prior accepted average rate of 18.39%, which was in line with our expectation of the government rejecting expensive bids to remain within the initial issue rate.
Ease on Inflation
With the Inflation rate at 6.3% as of February 2024, the real return of the bond is 12.1%.
The shilling is being anchored by diaspora remittances which currently stands at a cumulative $4.2 billion in the 12 months to January 2024, 5.3% higher than the $4 billion recorded over the same period in 2023.
The tourism inflow receipts which came in at $333.9 million in 2023, a 24.6% increase from $268.1 million inflow receipts recorded in 2022, and owing to tourist arrivals that improved by 30.7% to 192,000 in the 12 months to December 2023, from 161,000 recorded during a similar period in 2022.
