Here are our views on the news making headlines today for Kenya:
The Kenyan shilling touched a fresh three-year low yesterday, with traders saying dollar demand from the energy sector could further weaken the local currency. The shilling was quoted at 94.40/50 to the dollar, after closing at 94.20/30 to the dollar on Friday. Traders said the shilling was unlikely to stabilize unless Central Bank offered support by selling dollars, as it has in the past week.
Our View: We believe that the Kenya shilling will weaken in the coming days as a result of declining tourism sector due to insecurity. Other contributing factors to this would be the widening current account deficit and low output in the local manufacturing sector. However, we still believe the CBK will be active to keep the currency at the sentinel levels. We expect diaspora remittances to reduce, further putting pressure on the shilling after the recent government move to suspend most money transfer firms after the terrorist attacks, however treasury has announced its plan to cut taxes on diaspora cash from September 2015 a move aimed at boosting remittances that have become an important source of hard currencies.
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