The Kenyan shilling held broadly steady against the US dollar and regional East African currencies over the past week, supported by a sharp rise in the country’s foreign exchange reserves, the Central Bank of Kenya said Friday.
According to the central bank’s latest update on financial markets, the shilling traded at about 129.30 to the dollar on Friday, little changed from 129.20 a week earlier, reflecting what authorities described as relative stability in the foreign exchange market.
“The Kenyan shilling remained relatively stable against major international and regional currencies,” the central bank said in its weekly bulletin.
The stability comes amid a significant increase in Kenya’s foreign exchange reserves, which the regulator said rose to US$14.6 billion, equivalent to roughly 1.9 trillion Kenyan shillings. The reserves provide cover for about 6.2 months of imports, comfortably above the statutory minimum requirement of four months.
The increase represents a rise of about US$2.06 billion from the US$12.5 billion recorded in late February, according to the central bank.
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Strong reserve levels are widely seen as a key factor helping stabilize the shilling after a period of volatility in recent years driven by global currency pressures, rising import costs and external debt obligations.
Against regional currencies within the East African Community, the Kenyan currency posted modest gains or remained stable over the past week.
The shilling strengthened against the Ugandan shilling, trading at 28.96 per Kenyan shilling on Friday compared with 28.52 a week earlier. It also appreciated against the Tanzanian shilling, rising to 20.10 from 19.85 over the same period.
Meanwhile, the Kenyan currency remained unchanged against the Rwandan franc at 11.28.
Analysts say currency movements within the East African bloc often reflect trade flows, cross-border investment and demand for regional currencies used in commerce across the bloc.
Against major global currencies, the Kenyan shilling showed mixed performance during the week.
The local currency strengthened slightly against the euro, trading at 149.16 per euro compared with 150.12 the previous week.
However, it weakened marginally against the British pound, which traded at about 173.00 Kenyan shillings, up slightly from 172.72 previously.
The central bank attributed the overall stability of the shilling to adequate foreign exchange liquidity in the market and the continued buildup of reserves.
Kenya’s foreign exchange reserves play a critical role in supporting the currency by allowing the central bank to intervene in markets if needed and by boosting investor confidence in the country’s ability to meet external obligations.
The latest figures indicate that the reserve level remains comfortably above the threshold required under Kenyan law, which mandates that the central bank maintain at least four months’ worth of import cover.
Authorities have been seeking to strengthen the country’s reserve position as part of broader efforts to stabilize the currency and manage external shocks, including fluctuations in global commodity prices and international financial market conditions.
In recent months, policymakers have emphasized prudent monetary management and stronger inflows from exports, remittances and foreign investment as factors helping improve the country’s external position.
The Central Bank of Kenya has also pointed to relatively stable demand for foreign currency from importers and businesses as contributing to the calm in the exchange market.
Currency stability is closely watched in Kenya because fluctuations in the shilling can affect inflation, external debt servicing costs and the price of imported goods such as fuel and industrial inputs.
For now, the combination of stronger reserves and steady market conditions appears to be helping keep the Kenyan currency on a relatively stable footing, central bank data suggests.
