Kenya’s shilling has remained largely unchanged at around 129 units to the US dollar for the past year, presenting a mixed bag of outcomes for traders, commercial banks, and import-driven businesses.

After a sharp depreciation in early 2023 that pushed the local currency to record lows of over 160 per dollar, the Central Bank of Kenya (CBK) adopted a series of monetary tightening policies, including aggressive interest rate hikes and increased forex market supervision.

These measures helped to stabilise the shilling and anchor inflation expectations. However, the currency has now settled at a new plateau of 129 to the dollar, staying within a narrow trading range for the last twelve months.

This stability has come as a relief for importers, many of whom were battered by the earlier volatility that inflated the cost of essential goods, raw materials, and petroleum products.

The predictability in exchange rates has allowed businesses to plan better, reduce forex hedging costs, and avoid pricing shocks. Traders dealing in machinery, electronics, and consumer goods have particularly benefited from the steady rate.

On the other hand, commercial banks and currency dealers have seen a decline in forex trading income. With the shilling locked in a narrow band, the opportunities for arbitrage and speculative gains have diminished.

Several banks, which previously posted sharp increases in forex trading income during periods of volatility, have now reported a cooling in their non-interest revenue streams.

Exporters, too, are feeling the pinch. A relatively stronger shilling has eroded the earnings of firms selling goods abroad, particularly those in the horticulture, tea, and coffee sectors.

The lower forex conversion gains have led some to call for a more flexible exchange rate policy to help cushion them against external shocks.

Analysts argue that while the current rate stability is welcome, it also masks underlying vulnerabilities, including high external debt repayments and a narrowing current account deficit.

With the CBK expected to maintain a tight monetary stance and investor inflows remaining steady, the shilling is likely to remain in its current range in the near term unless global shocks or domestic political risks shift the balance.