On Monday morning, the Kenyan shilling fell to a new low against the US dollar, continuing a trend that began in May 2020.
The Kenyan shilling was mapped at 122.64 units against the US dollar immediately after the market opened, before rising to Friday’s value of 122.15.
The weakening trend in the Kenyan shilling is expected to continue into 2023, with the US expected to raise interest rates again, possibly in December.
Rate hikes in the Eurozone and the United Kingdom, on the other hand, are widely expected to have a smaller impact on the shilling, as both economies are suffering from the fallout from the Russia-Ukraine crisis.
Analysts predict that the shilling’s losses will continue into 2023, with the average exchange rate hovering between 125 and 128.
The Kenyan shilling has lost 8% of its value against the US dollar so far in 2022.
This has put traders in a difficult position, limiting their ability to import.
Consumers have been forced to bear the high import costs, which have increased the cost of living.
In October, inflation reached a seven-year high of 9.6 percent.
The stronger US dollar has also hit at Kenya’s official foreign currency reserves, which currently amount to four months’ worth of import cover, which is the Central Bank of Kenya’s (CBK) prescribed lower limit.
According to the CBK, the local unit has been “in the middle of the pack” when compared to other regional currencies in Sub-Saharan Africa.
The relative stability of the Kenyan shilling in 2022 has been aided by increased remittances and improved exports.
