(Bloomberg) -- Kenya’s shilling is expected to depreciate at a slower rate this year, compared with 2022, on bets the US Federal Reserve will ease the pace of interest-rate hikes and expectations of a boost in foreign reserves. 

The currency of East Africa’s largest economy has slid for 21 straight months against the dollar, the longest losing streak since 1989, according to data compiled by Bloomberg. It declined 9% against the greenback last year.  

Last year’s decline was largely fueled by twin threats of rising US interest rates and a global recession that sent traders to the safety of the dollar. That’s likely to change this year with inflation cooling in the US and policy tightening ebbing, Churchill Ogutu, an economist at IC Group, said by phone.

Policymakers are poised to raise the benchmark federal funds rate by a quarter percentage point on Wednesday, to a range of 4.5% to 4.75%, dialing back the size of the increase for a second-straight meeting. 

“I expect the level of rate hikes to be smaller and I expect one rate hike in the first half,” ICEA Lion Asset Management Ltd., Head of Research Judd Murigi said. “I expect two for the whole year. We expect the shilling to face a lower level of depreciation compared to the prior year.”

Expectations by Kenya’s central bank that the economy will grow 6.2% this year, more than double the 2.9% forecast by the International Monetary Fund for the global economy and that inflation will continue to ease — closing the 25 basis-point gap between price growth and the policy rate — are also likely to attract investors and boost the currency. 

The shilling may also receive support from an increase in foreign-currency reserves within months.

The nation will get at least $400 million from the World Bank by the end of June, central bank Governor Patrick Njoroge said Tuesday. About $300 million more is expected from the IMF after it completes a program review scheduled for June, he said.

The important buffer to short-term shocks and fending off currency depreciation has fallen to the lowest level since 2015.

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