The Kenyan shilling gained against the US dollar on Tuesday, May 13, continuing a nine-month streak of stability.
By 0709 GMT, the shilling was trading at 128.80/129.40, up from Monday’s closing rate of 129.00/129.50, according to data from the London Stock Exchange Group.
Despite global currency volatility and persistent inflation concerns, the Kenyan shilling has remained relatively stable
Moreover, the currency has now stabilized around the 129 mark since August 2024, showing minimal volatility against the economic pressures.
The trend reflects the Central Bank of Kenya’s efforts to support the local currency through targeted interventions and monetary policy controls.
However, the prolonged currency stability comes after a period of sharp depreciation in 2023, when the shilling hit record lows due to rising external debt repayments and global interest rate hikes.
Also Read: Kenyan Shilling Strengthens Against US Dollar Despite Ease of Trade War
Will Continuous Dollar Decline Affect the Kenyan Shilling?
Meanwhile, the U.S. dollar has continued to weaken against major currencies, including the yen and euro, on Monday May 13.
This as markets continued to grapple with uncertainty surrounding President Donald Trump’s tariff policies and their potential impact on the economy.
The greenback hit a new record low against the Taiwan dollar, dropping to 28.8150, amid speculation that Taiwan may be allowing its currency to appreciate as part of a trade deal with the U.S. according to Reuters.
Additionally, other currencies in the Asia-Pacific region, including the Australian dollar, strengthened against the U.S. dollar, with the Aussie reaching $0.64935, its highest point since December of the previous year.
Further, the dollar’s selloff against Asian currencies is partly attributed to the unwinding of large, unhedged positions held by investors, such as life insurers in Taiwan, amid growing concerns about additional U.S. tariffs, according to Marc Chandler, chief market strategist at Bannockburn Global Forex.
The US dollar’s recent decline, now at a three-year low against the euro, is sparking concerns among global fund managers about its future as the dominant global currency and its effects on currencies like the Kenyan shilling.
Key sectors like fuel and food imports to external debt repayments are highly exposed to dollar fluctuations.
Also Read: Kenyan Shilling Affected in Global Shakeup as US Dollar Weakens
Factors that Influence Currency Values
Currency values are influenced by several key factors, with monetary policy being one of the most important.
However, higher interest rates often attract foreign investment, which can drive up the value of a currency.
Additionally, currencies from countries with lower inflation tend to maintain higher value, as their purchasing power remains more stable.
Strong economic indicators such as low unemployment, high GDP growth, and consumer confidence also contribute to a stronger currency.
Stable governments and financial systems also play a big role in attracting foreign investment, which supports currency strength.
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