The shilling has now clocked a year trading at the 129 level versus the dollar, giving importers stable and predictable prices of goods from abroad, even as investors holding dollars as an asset and commercial banks rue the lack of movement from which they derive their margins.
The shilling traded at an average of Sh129.23 on Monday—as per the official Central Bank of Kenya rate—compared to a rate of Sh129.25 a year ago. In the intervening period, it has traded within a range of Sh129.04 to Sh129.80, which is in contrast with the previous year when a highly volatile market saw the local unit touch an all-time low of Sh161 to the dollar.
The stable rate, as well as improved supply of dollars in the market, has had the effect of reducing the margin between buying and selling prices quoted by banks and forex bureaus in the currency market.
At the height of the foreign exchange crisis in early 2024, the dollar’s buy-sell spread margin had gone as high as 13 units, but this has since come down to between 4.5 and Sh6.5 units among tier one banks, which control the bulk of the forex market.
As a result of the recent rate stability, the banking sector as a whole saw a 53 percent drop in its forex trading income to Sh10 billion in the first quarter of 2025.
In their half-year financial results, Equity Group and Stanbic Bank reported forex trading income declines of 21 percent and 58.2 percent to Sh5.2 billion and Sh1.96 billion, respectively. Other tier one banks are yet to release their 2025 half-year financials.
“The currency has been unbelievably stable. If you’d gone to bed in July 2024 and woken up last week, you would not believe that the shilling had moved from 129.10 to 129.30,” said Stanbic Holdings Plc chief executive officer Patrick Mweheire at the lender’s half-year financial briefing on Thursday.
“That’s a great thing because it brings stability, but banks like a little bit of volatility. The lack of volatility has affected some of our markets.”
In contrast to the dollar, the shilling’s movement versus other global and regional currencies has been more pronounced, making the dollar an outlier in terms of stability in the market. The shilling has depreciated by 6.43 percent and 5.29 percent versus the euro and British pound in the past year, exchanging at an average of Sh150.83 and Sh174.05, respectively, yesterday.
At the same time, it has appreciated by 4.45 percent and 8.63 percent against the Ugandan and Tanzanian shillings, which are currently exchanging at 27.60 and 19.22 units per Kenyan shilling.
An importer paying for overseas supplies in dollars would therefore benefit from lower prices in shilling terms in the period compared to one paying in euros. On the other hand, exporters to Europe who get paid in pounds and euros are enjoying a higher income upon conversion compared to those being paid in dollars.
Similarly, expatriates and workers in international organisations who are paid using the two European currencies have enjoyed an exchange gain not available to their dollar counterparts. The same case applies to recipients of diaspora remittances.
The prolonged stability of the dollar has also served to reduce speculative trading and hoarding of the US currency, allowing the CBK to make dollar purchases from the market and grow its forex reserves to an all-time high of $11 billion.
In February last year, the National Treasury and the CBK undertook several measures to stabilise the forex market, including fixing a dysfunctional interbank dollar market, addressing sovereign debt default fears by refinancing a $2 billion Eurobond, and raising domestic interest rates to attract foreign inflows.
The shilling responded with a gain from a rate of Sh161 to the dollar in February 2024 to Sh129.04 by early August 2024. Treasury PS Chris Kiptoo earlier this year said that were it not for the CBK buying dollars in the market, the rate would have gone even lower, a view backed by global ratings agency Moody’s last week in its latest sovereign note on Kenya.
“The foreign exchange market has stabilised…with indications the Kenya shilling would have appreciated more were it not for the central bank's proactive reserve accumulation strategy,” said the agency.
Through a combination of the dollar purchases and inflows from foreign loans, the official forex reserves rose from $7.27 billion (Sh939.5 billion) in August 2024 to an all-time high of $11.2 billion (Sh1.45 trillion) in mid July 2025, although they have since come down to $10.9 billion (Sh1.41 trillion) after the CBK made debt payments on behalf of the government.
