The Kenyan shilling strengthened to 99.75 against the US dollar, marking the first time since July 2015 that the currency has reached such levels. This shift coincides with reduced demand for foreign exchange from importers, according to a commercial bank trader who noted, "The shilling is strengthening because flows are not getting absorbed by demand."
Foreign currency inflows remained robust in 2018, driven by record remittances from Kenyans abroad and increased tourism earnings. These factors contributed to sustained pressure on the shilling's value despite economic fluctuations.
Economic analysts caution that while a stronger shilling benefits importers and reduces government debt servicing costs, it negatively impacts local exporters by making their products more expensive globally.
Citibank recently projected the shilling could weaken further, forecasting a rate of 108.9 by year-end amid ongoing currency market dynamics.
