The Kenyan shilling experienced an exceptional surge against the US dollar on Wednesday, marking its most robust performance in the past 12 years. This sudden uptick was driven by increasing investor confidence following the government’s receipt of funds to settle the $2 billion Eurobond. Wednesday’s rally lifted the local currency to its highest valuation since November last year, effectively nullifying all earlier losses this year. Notably, the shilling has appreciated for 11 consecutive days, trading below Sh153.75 at specific commercial banks.
Major banks such as Equity Bank and KCB quoted the dollar at Sh153.75 and Sh157.5, respectively, with KCB providing the highest quote among the eight banks monitored by the Business Daily. Forex bureaus offered the dollar within the range of Sh152 to Sh157. By Tuesday, the Central Bank of Kenya (CBK) had listed the local unit at Sh156.7 against the dollar. The notable appreciation of the shilling is expected to decrease import expenditures in local currency terms, as importers will now require fewer funds for the same volume of goods.
The strengthened shilling is also poised to reduce debt servicing expenses for the government. The Treasury estimates that a one-unit shift in the currency can affect debt servicing costs by Sh40 billion. In the week leading up to the previous Tuesday, the shilling gained 3.62 units against the dollar, resulting in a significant reduction of Kenya’s debt service payments by Sh144.8 billion over just seven days. Kenya’s recent move to repurchase a portion of its Sh313 billion ($2 billion) Eurobond notes reaching maturity in June has assuaged investor concerns, supporting the shilling rally by reinforcing foreign currency inflows.
