The Kenyan shilling has recorded a gain against the US dollar on Monday, May 5. This continues a recent trend of relative stability in the foreign exchange market.
According to data from the London Stock Exchange Group (LSEG), the shilling was quoted at 128.75/129.75 per dollar as of 09:26 GMT.
This marks a slight appreciation compared to Friday’s closing rate of 129.00/129.50.
The US Dollar (USD) has continued to weaken, with traders closely monitoring developments in US-China trade relations.
The strengthening is attributed to improved dollar inflows from exports and remittances, and the Central Bank of Kenya’s ongoing efforts to manage currency volatility.
Over the weekend, U.S. President Donald Trump confirmed that trade negotiations with China were ongoing, adding that no direct talks with Chinese President Xi Jinping were planned.
The move followed an announcement made on Friday, May 2, from China’s Commerce Ministry that it is currently evaluating a U.S. proposal to resume discussions.
Additionally, Trump drew attention with comments on tariffs, causing growing concern for American companies exploring the option of shifting production away from China.
On Sunday, May 4, he acknowledged the toll high tariffs can take.
“Eventually, I’ll reduce them, because otherwise, it becomes impossible to do business, and they’re very eager to trade,” said Trump.
Also Read: Kenyan Shilling Affected in Global Shakeup as US Dollar Weakens
Factors that Influence Currency Values
The US dollar has seen a sharp decline, with the dollar index (DXY) on track for its weakest monthly performance since November 2022.
So far in 2025, it has dropped 8.4% against a basket of major global currencies. However, the dollar still remains stronger than it was in 2021, suggesting there may be more room to weaken.
Several key factors influence currency values, including monetary policy. Higher interest rates tend to attract foreign investment, boosting a currency’s value.
Additionally, currencies from countries with lower inflation often hold more value, as their purchasing power remains more stable.
Further, strong indicators of economic performance like low unemployment, higher GDP growth, and confident consumers typically support a stronger currency.
Stable governments and financial systems also tend to attract foreign investment and support currency strength, while countries that export more than they import (trade surplus) usually see stronger demand for their currency.
Also Read: Kenyan Shilling Remains Stable as Dollar Demand Drops
What The Weakening on the US Dollar Means
According to analysts at the IG, the weakening of the US dollar seems driven by declining investor confidence in the US economy.
Stock markets are more volatile due to trade tensions and concerns about the independence of the Federal Reserve.
At the same time, long-term US Treasury yields are rising, something that would normally attract investors and strengthen the dollar. Instead, this trend suggests a shift in investor sentiment, with many now viewing US assets as riskier.
Adding to the concern, the International Monetary Fund (IMF) recently raised the chances of a US recession to 40%, further pressuring the dollar.
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