The Kenya shilling depreciated to record lows in the first half of 2022. During the period, the shilling lost 4.20% of its value to 117.80/118.00 against the Dollar.
The depreciation has been partly attributable to increased dollar demand in the energy, oil and manufacturing sectors.
Q1’2022, the shilling remained under pressure, depreciating by 5.0% y/y to close the quarter at Kshs 115.0, from Kshs 109.5 at the end of Q1’2021.
However, the shilling was supported by the sufficient forex reserves held by the Central Bank of Kenya, which increased by 6.8% in the same period to close the quarter at USD 7.8 billion, from USD 7.3 bn recorded at the end of Q1’2021.
In their July monthly economic report, “Widening interest rate differentials and accompanying declining risk appetite for the shilling will continue to undermine the local currency,” NCBA Market Research says.
A weak shilling increases the cost of imports as more local currency units are now needed to exchange for the hard currencies used in the international markets.
