Kenyan Shilling Weakens Against the Dollar Amid Increased Foreign Currency Demand
by The Misfit
On Friday, the Kenyan shilling experienced a slight decline against the United States dollar, marking a reversal from its recent trend of strengthening against major global currencies.
The weakening of the local currency was largely driven by increased demand for foreign currency, particularly from fuel importers and manufacturers. As of September 13, the London Stock Exchange Group (LSEG) quoted the Kenyan shilling trading at 128.50/129.50 to the dollar, a marginal dip from the previous day’s closing rate of 128.30/129.30.
The surge in demand for dollars by importers engaged in international trade has impacted the forex market, contributing to the shilling’s recent decline.
Despite this recent dip, traders remain optimistic about the stability of the Kenyan shilling, noting that it remains within a range that could potentially stabilize soon. Analysts cited by Reuters anticipate that the shilling may strengthen in the coming week due to a projected decrease in dollar demand.
Over the past week, the shilling has been relatively stable, supported by dollar inflows from the recently issued infrastructure bond and the Central Bank’s efforts to manage currency volatility. The Kenyan shilling has demonstrated resilience throughout the year, appreciating approximately 17 percent against global peers, as reported by the Central Bank of Kenya (CBK).
This positive performance has been bolstered by the government’s strategic decision to repay the Ksh310 billion ($2 billion) Eurobond, which has eased investor concerns regarding the country’s debt repayment abilities. Additionally, increased dollar inflows from agricultural exports, particularly tea and coffee, have further supported the shilling, thanks to rising demand in 2024.
However, the shilling faced some headwinds in July following credit rating downgrades from agencies such as Moody’s and S&P Global Ratings. Moody’s downgraded Kenya’s credit rating from “B3” to “Caa1,” citing concerns over the country’s debt affordability and overall liquidity.
“The negative outlook reflects downside risks related to government liquidity,” the credit rating agency noted in its statement.
