NAIROBI, Kenya — The Kenya shilling remained broadly stable against the US dollar on August 10, trading at 129.40, as strong foreign exchange reserves, easing oil prices and stable domestic liquidity continued to support the currency.
Latest data from the Central Bank of Kenya (CBK) showed the shilling exchanging at 129.40 per US dollar, 174.64 against the British pound and 149.56 against the euro on August 10.
The shilling has recorded limited movement in recent weeks, maintaining relative stability despite fluctuations in global currency markets.
CBK data showed the currency traded at 129.41 against the dollar on August 6, compared with 129.40 on July 30, indicating only marginal movement over the period.
Forex reserves remain above six months of imports
The shilling’s stability has been supported by Kenya’s strong foreign exchange reserve position.
CBK data showed foreign exchange reserves stood at $15.25 billion on August 6, equivalent to 6.3 months of import cover.
The latest reserve level is also comfortably above the CBK’s statutory requirement of at least four months of import cover, providing a buffer against external financial shocks and supporting confidence in the local currency.
Money market remains liquid
Domestic financial conditions also remained relatively stable during the week ended August 6.
Commercial banks held excess reserves averaging Sh17.7 billion above the required cash reserve ratio of 3.25 per cent.
The Kenya Shilling Overnight Interbank Average Rate remained unchanged at 8.75 per cent on both July 30 and August 6.
Demand for government securities also remained strong.
At the August 6 Treasury bill auction, investors submitted bids worth Sh30 billion against an advertised amount of Sh28 billion, representing a performance rate of approximately 107 per cent.
Treasury bill yields declined marginally during the period. The 91-day Treasury bill rate stood at 8.782 per cent, while the 182-day and 364-day rates closed at 8.950 per cent and 9.004 per cent, respectively.
Lower oil prices offer relief
The shilling’s resilience comes despite renewed strength in the US dollar.
According to CBK data, the US Dollar Index rose by 0.07 per cent during the week ended August 6, reflecting increased demand for the US currency in international markets.
A stronger dollar can place pressure on emerging-market currencies by increasing the cost of dollar-denominated imports and external obligations.
However, lower international oil prices provided some relief for Kenya.
Murban crude oil fell to $72.54 per barrel on August 6, from $78.24 on July 30.
Lower oil prices can reduce Kenya’s demand for foreign currency because petroleum imports are largely settled in US dollars. This can ease pressure on the country’s import bill and, in turn, reduce demand for dollars in the domestic foreign exchange market.
Why the shilling’s stability matters
The exchange rate has a direct bearing on the cost of imported goods and services in Kenya.
The country relies heavily on imports of petroleum products, medicines, machinery, electronics and some food commodities, many of which are purchased using US dollars.
A weaker shilling means importers need more local currency to obtain the same amount of foreign exchange, raising their operating costs. Businesses may subsequently pass those higher costs on to consumers through increased prices.
Conversely, a relatively stable exchange rate provides greater certainty for importers, manufacturers and other businesses that depend on foreign-currency transactions.
The shilling’s performance is therefore closely watched by households and businesses because prolonged depreciation can contribute to inflationary pressures, while stability can help contain imported inflation.
