The Kenyan shilling has been ranked by Bloomberg data among the top five most stable currencies globally, with volatility of just 1.5 percent over the past year. This ranking reinforces confidence in the country's economic management efforts. Central Bank of Kenya Governor Kamau Thugge attributes the stability to improvements in the nation's external financial position.
According to Bloomberg data, the Kenyan shilling has maintained steady performance against the US dollar for more than a year, recording a volatility rate of just 1.5 percent. This positions it among the least volatile currencies worldwide, outperforming several major ones. In the top five for volatility, the Argentine peso ranked highest at 22.4 percent, followed by the Israeli shekel at 11.8 percent and the South African rand at 10.8 percent. The Indian rupee had 4.8 percent volatility, while the Kenyan shilling stood at 1.5 percent. Only the Hong Kong dollar showed lower volatility at 0.9 percent compared to other global currencies.
Currency volatility refers to the frequency and magnitude of fluctuations in a currency over a specific period, serving as an indicator of market risk, fear, and uncertainty. Lower volatility typically signals a more stable currency, which attracts investors, importers, exporters, and businesses engaged in long-term transactions.
A stable currency can help reduce import costs, lower inflation rates, and boost investor confidence. For businesses, it offers predictability in pricing and planning. Central Bank of Kenya Governor Kamau Thugge recently stated that the local unit's stability stems from improvements in the country's external financial position. He noted that Kenya's current account balance has performed relatively well, supported by increased foreign direct investment and higher foreign participation in local-currency government bonds.
Additionally, improved diaspora remittances and stronger export earnings have bolstered the country's foreign exchange reserves, enabling the central bank to better shield the currency from external shocks. Over the past year, the shilling has hovered between Ksh128 and Ksh130 per US dollar since August 2024, when the Central Bank began cutting interest rates.
