Kenya: Kenyan shilling appreciates slightly in October from nearly-four-year low
October 12, 2015
The Kenyan shilling appreciated slightly in the second half of September and at the beginning of October, after weakening to the lowest value in nearly four years and trading at 106.2 KES per USD on 7 September. In recent weeks, the shilling reversed the general downward trend that had been in place since the beginning of 2014. On 12 October, the shilling traded at 103.1 KES per USD, which was 2.3% stronger than on the same day in September. Nevertheless, this was still 15.7% weaker than on the same day last year. Since the beginning of this year, the shilling has lost 13.9% of its value.
The recent appreciation of the shilling resulted from increased dollar inflows from investors who were attracted by rising yields on government securities. In addition, a shortage of shilling liquidity led to higher overnight lending rates. Nevertheless, the underlying factors that put the shilling under pressure over the course of the last year still remain in place: increasing strength of the U.S. dollar, Kenya’s large current account deficit and weakness in the tourism sector, which was adversely affected by security concerns over terrorist attacks.