The Kenyan Shilling has, over the past weeks, shown notable resilience against major international currencies, trading at Ksh129.28 to the US dollar as of Friday last week. This relative stability comes at a time when many emerging market currencies are facing depreciation pressure from a stronger US dollar and tightening global financial conditions.
One of the key drivers supporting the shilling is the sustained growth in diaspora remittances. In May alone, according to data from the Central Bank of Kenya (CBK), Kenyans abroad sent home Ksh56.93 billion (USD 440.1 million), pushing the cumulative 12-month total to Ksh650.72 billion (USD 5.03 billion)—an 11.6 per cent increase from the same period last year.
According to the CBK, these remittances are instrumental in bolstering the country’s foreign exchange reserves and ensuring liquidity in the forex market.
The US remains the leading source of these remittances, contributing 57 per cent in May 2025. This steady inflow of dollars not only supports the current account position but also offsets some of the pressures caused by rising import costs, debt repayments, and investor capital flight in response to global uncertainty.
In addition to remittances, Kenya’s export performance—particularly in key sectors like tea—continues to provide critical support for the local currency. Tea remains one of the country’s top foreign exchange earners, and global tea prices have stayed relatively firm despite supply disruptions in competing markets like Sri Lanka and India.
Increased demand from traditional buyers in the Middle East and Asia has also propped up earnings, despite the geopolitical tensions.
Another buffer for the shilling is the CBK’s management of the country’s foreign exchange reserves. As of June 19, Kenya’s usable reserves stood at Ksh 1.410 trillion (USD 10.91 billion), equivalent to 4.8 months of import cover, comfortably above the statutory threshold of 4 months. This gives the central bank room to intervene in the market if needed, curbing excessive volatility.
The recent oversubscription of government securities has also helped support the shilling by attracting both local and foreign investment.
On June 18, the Treasury reopened 15-year and 30-year bonds, receiving Ksh101.4 billion in bids—more than double the Ksh50 billion offered. Strong investor appetite for these long-term bonds is a signal of confidence in the country’s fiscal management and helps to stabilise the currency by increasing dollar inflows.
The interbank market, which is a key indicator of liquidity conditions, also reflects a relatively steady environment. The average interbank rate eased slightly to 9.65 from 9.72 per cent the previous week. Though liquidity remains tight—as evidenced by a drop in the number and volume of transactions—the market has not shown signs of panic or excessive strain.
Globally, the US Federal Reserve and the Bank of England both held interest rates steady amid lingering inflation concerns. The stable policy stance helped avoid any immediate shocks to global capital flows, giving emerging markets like Kenya some temporary relief from external financial pressure.
Despite this, Kenya's shilling has avoided sharp depreciation thanks to a combination of sound monetary policy, strategic forex reserve management, and strong inflows from remittances and exports. The CBK’s active presence in the money market, including tight control over commercial banks’ excess reserves, has also helped prevent undue pressure on the local unit.
Looking ahead, the sustainability of this stability will depend on several factors, including global commodity prices, investor sentiment, and domestic economic performance. While the current fundamentals are holding up, a worsening in the global environment—such as a spike in oil prices or aggressive US rate hikes—could likely trigger renewed pressure on the shilling.
