Kenyan Shilling maintains stability at 129 against the dollar six months running
The gain was attributed to the successful settlement of the inaugural $2 billion (Sh259 billion) Eurobond buyback plan
The Kenyan shilling has maintained a steady performance against the US dollar in the past six months to January this year, exchanging at an average rate of 129.
The local currency began to retreat from the 130 mark in late July, following a period of consecutive strengthening since early February, when it hit the historic low of 160.
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The gain was attributed to the successful settlement of the inaugural $2 billion (Sh259 billion) Eurobond buyback plan, where the government paid back $1.5 billion (Sh194.5 billion) in February, boosting investor confidence.
Arguably, the stable play against the greenback is a welcome relief for both consumers and importers alike.
With import costs directly tied to the strength of the shilling, the sustained rate signals some respite for the economy, particularly in stabilising the prices of imported goods.
The knock-on effect is to the benefit of the consumers, who would breathe a sigh of relief at the stabilising commodity prices as the country is still a net importer.
The Central Bank of Kenya quoted the local currency at an average of 129 in the last week of January this year.
Compared to the same period last year when it traded at an all-time low of 160, the local currency has gained about 31 unit values, representing a 19 per cent gain year-to-date.
Consumer prices
The drastic depreciation since early 2020, when the shilling started weakening, until early 2024, put significant pressure on consumer prices, driving up costs across the board, from fuel to everyday household items.
This pushed the level of inflation to the highs of nine percent sometimes in 2022 and 2023.
However, the current stability offers a more favourable environment for businesses reliant on imports, which is expected to translate into more predictable pricing for consumers.
For instance, early last year when the Shilling weakened to about 161 against the dollar, it meant importers were spending as much as Sh161 to buy a single dollar for their imports.
Currently, with the shilling exchanging at the 129 average, it means importers are spending about Sh30 less than what they used to spend to purchase a single dollar when the shilling was at its lowest.
Consequently, the country has witnessed a reduction in prices of some food and non-food commodities in the past months, pushing down the level of inflation to 3.0 per cent in December.
Experts have argued in the recent past that the shilling's steadiness also reflects broader macroeconomic improvements, including stronger foreign exchange reserves and strategic interventions by the CBK.
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