From Weakest to Stongest in the World: The Story of the Kenyan Shilling

• By Clinton Wanjala
• Aug 29, 2024

Kenya's currency, the shilling, has made a big comeback. It went from being one of the weakest currencies to one of the strongest in the world in less than three months.

Just in January, it was doing very poorly against the dollar. However, the recent past has seen it doing much better, going up by more than 20%.

This improvement can be attributed to a few things, like getting money from the International Monetary Fund and the World Bank, and also issuing of a new eurobond.

Read: Kenya's Economic Landscape

On Thursday, the shilling got even stronger, going up by 1.4%. It reached 136.79 shillings per dollar in Nairobi, and it's been going up for ten days in a row.

According to Shani Smit-Lengton from Oxford Economics, the shilling's rise is mostly because of the extra support from the IMF and the World Bank, and also because of the new eurobond. 

Last year, the shilling went down by 21%, mainly because the dollar was strong, and Kenya didn't have enough foreign money saved up. Smit-Lengton thinks the shilling will keep getting stronger, hitting 135.9 shillings per dollar by June and then dropping to 141.0 shillings per dollar by the end of the year.

Read: Why Many Kenyan Youths Struggle Financially

Eric Musau from Standard Investment Bank in Nairobi says that other things helping the shilling bounce back include high interest rates and slow inflation. This makes Kenya a good place for people to invest in.

Right now, the shilling is on its way to having its best March since 2008, after its strongest February improvement in history. But some people worry that it's getting stronger too quickly. The "14-day relative strength index," which shows if a currency is being bought too much, is at 11.97, which is lower than it should be.

Musau thinks the shilling's current strength is okay, but Kenya needs to have more foreign money saved up in foreign currency reserves. Right now, they only have enough for less than four months of buying stuff from other countries.