The Kenyan shilling has been projected to weaken against the US dollar towards the end of May due to an increase in demand for the foreign currency.
According to Reuters, the local currency is expected to weaken marginally due to higher demand for the dollar from manufacturers, who require the foreign currency to complete their trade on the international market.
It is worth noting that international trade is primarily conducted using the dollar; therefore, increased demand for the US currency places pressure on the local currency, causing it to weaken.
Reports by forex experts indicated that demand for the dollar from the manufacturing sector is expected to outpace foreign currency inflows from diaspora remittances and Non-Governmental Organisations (NGOs).
Inflows from diaspora remittances have, in recent weeks, kept the shilling stable against the dollar despite fears that the local currency could weaken due to US President Donald Trump's stringent monetary policies.
"We see the shilling weakening a little towards the end of the month due to the demand from importers in the manufacturing sector," an expert told Reuters.
As of Thursday, May 22, the London Stock Exchange Group (LSEG) quoted the shilling trading at 129.50 units against the dollar, the same as Wednesday, May 21.
The shilling has largely remained unchanged over the past month due to a combination of factors, including the Central Bank of Kenya's (CBK) intervention to prevent the easing of the local unit.
Low import activity by the manufacturing sector and increased foreign currency inflows, which have boosted the country's forex reserves, are also among the factors keeping the shilling stable.
While the shilling has retained its winning streak against the greenback, it is no longer the best-performing currency in the world, despite strengthening by substantial margins last year.
In 2024, Kenya's currency was the best-performing after it gained 18 per cent against the dollar, following the government's repayment of the Ksh316 billion Eurobond that matured in June last year.
However, the local currency recently lost its recognition as the best-performing currency after being overtaken by the Kuwaiti dinar, which is currently the best-performing currency globally in 2025.
