Kenya shilling slumps to Ksh.122 mark against U.S dollar

The Kenyan shilling has slumped below the Ksh.122 mark against the U.S dollar as it closes yet another key confidence marker.

The local currency changed hands for the green buck at a mean rate of Ksh.122.06 at the start of trading before slight gains on intra-day trading on Thursday.

A stronger dollar from upward revisions in interest rates since March this year in the U.S has had the inverse effect of weakening other global currencies as foreign investors withdraw funds from frontier and emerging markets such as Kenya.

The weakening trend in the Kenyan shilling is set to continue into 2023 with the U.S tipped for additional rate hikes including in December.

Rate hikes in the Eurozone and the United Kingdom are however widely expected to have a lesser impact on the shilling as the pair of economies suffer from the fall-out of the Russia-Ukraine crisis.

Analysts at Sterling Capital expect the shilling’s losses to persist throughout 2023 and expect the mean exchange rate to stand at between Ksh.126 and Ksh.128 across the year.

So far in 2022, the Kenyan shilling has shed 7.9 per cent of its value against the U.S dollar.

The stronger U.S dollar has not only put pressure on the local currency but has also hit at Kenya’s official foreign currency reserves which presently stands at an equivalent four months of import cover, to equal the Central Bank of Kenya (CBK) prescribed lower limit.

Compared to other regional currencies in Sub-Saharan Africa, the local unit has sat ‘in the middle of the pack,’ according to the CBK.

This is as currencies such as the Malawian Kwacha and the South African rand mark a significantly larger weakening against the U.S dollar in the same period.

The relative stability of the Kenyan shilling has been partly held up by increased remittances and improved exports in 2022.