Kenyan Shilling Overvalued, May Withstand Shocks, RenCap Saysby
While the Kenyan shilling is overvalued by 19 percent at current levels, the risk of further depreciation has fallen over time, according to Renaissance Capital.
“Our model has accommodated the thinning current account, rising foreign-exchange reserves, the IMF credit facility, which means if the currency has exogenous shocks, it can get some support from this,” Yvonne Mhango, Renaissance Capital’s economist for Africa, said at a conference in Nairobi. “Also despite the rate cuts, monetary policy remains firm, and hence the shilling has low risk of depreciation.”
The shilling has gained 1 percent against the dollar so far this year to 101.25 by 10:09 a.m. in Nairobi. It depreciated 11.3 percent in 2015.