Kenyan Shilling Strengthens Against US Dollar After Remaining Unchanged for Months

The Kenyan shilling strengthened against the US dollar on Friday, marking its first significant gain since November last year.

Experts at Reuters attributed the shilling’s recovery to increased foreign currency inflows from investors purchasing government bonds.

According to data from the London Stock Exchange Group (LSEG), the shilling traded at 128.25 against the dollar on Friday, February 7, an improvement from Thursday’s closing rate of 130.00.

This development follows the Central Bank of Kenya’s (CBK) recent move to attract investors by issuing tax-free infrastructure bonds, aiming to raise Ksh70 billion.

CBK’s decision to float the government securities was projected to boost the local unit in the long term as more foreign investors used their dollars to purchase the lucrative bonds.

Since November last year, the local currency has remained unchanged, oscillating at Ksh129.50 and 130.00 against the dollar mainly supported by the Central Bank interventions to tame the local currency’s volatility.

The latest shilling’s stability was also attributed to the dollar inflows from diaspora remittances as Kenyans living abroad sent home more money. 

According to data from the Central Bank, remittances and tourism arrivals increased by 18 per cent and 14 per cent by December 2024, mainly boosted by favourable government policies.

Similarly, muted dollar demand from manufacturers and fuel importers also boosted the local currency by easing the pressure on foreign exchange on the international front.

Nonetheless, the shilling is expected to remain stable in the coming weeks despite the recent stringent measures imposed by US President Donald Trump’s administration.

Speaking during the first Monetary Policy Committee (MPC) meeting on Thursday, CBK Governor Kamau dismissed any potential easing of the shilling in the coming days attributing it to the growing diaspora remittances.

Meanwhile, despite recent fears of potential weakening, the shilling remains the best-performing currency globally after gaining by about 18 per cent since February last year.