The Kenyan shilling has depreciated to a 13-month low against the euro and sterling pound, enhancing export earnings for local horticultural producers targeting the EU and UK.
Central Bank of Kenya (CBK) data shows the shilling traded at 149.73 to the euro and 174.08 to the pound, levels last seen in March 2024. Despite this, the currency has held steady against the US dollar, losing just 0.45 percent over the same period.
The fall in value against the Euro and sterling pound is good news for Kenya’s export economy, as producers earn in these currencies. This development comes as exporters face stable input costs due to a steady dollar, which is typically used to buy agricultural supplies such as fertilizer.
EU and UK markets are major buyers of Kenya’s flowers, fruits, vegetables, tea, and coffee.
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Currency traders attribute the divergence to excess liquidity in the local market, prompting increased mop-ups by the CBK through repurchase agreements.
Analysts believe this is a temporary measure, with CBK applying a crawling peg strategy to maintain dollar stability. Reduced bank lending amid high default risks has added to liquidity pressures, indirectly affecting forex market dynamics.
While the weaker shilling benefits exporters, it poses challenges for importers and consumers, potentially leading to higher prices for imported goods. The Central Bank of Kenya continues to monitor the situation closely to ensure economic stability.
