Kenyan shilling firm this year as deficit shrinks

Kenya’s shilling has held firm against the dollar this year, supported by a shrinking trade deficit, higher transfers from workers abroad and an economy that has escaped the beating taken by others in Africa from weak commodity prices.

The shilling has been a sturdy performer among the main traded currencies on the continent in 2016, and weakened less than many others in 2015 as well. By 1008 GMT on Thursday, the shilling was quoted at 101.45/65 to the dollar, holding gains of 0.7 percent since the start of 2016.

Kenya still attracts foreign investors who are increasingly wary of other African markets, even as concerns about security dog the economy and worries about next year’s election dampen some enthusiasm.

Of the big three economies, Nigeria and Egypt have foreign exchange controls in place while South Africa has been roiled by plunging commodity prices. South Africa’s rand weakened 25 percent against the dollar in 2015 and has gained 0.8 percent this year.

 The shilling is up a similar amount this year but only slid 11 percent in 2015. Kenya, far smaller than its rivals but boasting a floating exchange rate and a relatively mixed economy, has drawn foreign investors.

They accounted for 60 percent of trade on the Nairobi bourse in the first two months of 2016, making net purchases worth Sh276 million.

Kenya and Morocco aside, there are few other places in Africa with liquid enough capital markets to register on the radar of foreigners interested in shares and government debt. “That combination of good companies and a beneficiary of lower oil have encouraged investors to stay in Kenya at a time when they have left other countries, like Nigeria,” said Charles Robertson, chief economist for Renaissance Capital.