In a compelling new financial narrative, the Kenyan Shilling is rapidly growing against the US dollar, threatening its global reputation. KSH, dubbed a notable currency among its eight East African contemporaries, is giving stiff competition to the USD, setting up a robust foundation for its peers to take inspiration from.
Kenya is undergoing a vibrant shift in its administrative infrastructure, helmed under the leadership of its president, Willian Ruto. The new financial era is being ushered in, which was spurred by the oversubscription of the nation’s infrastructure bonds. Presently, KSH is exchanging hands at $0.077, holding its ground steady against external factors and sentiments.
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The Rise of the Kenyan Shilling vs US Dollar
Kenyan Shilling is making a comeback on the global currency pedestal, leading the wave as the ultimate solo player. In an interview with the Chairman of the Presidential Council of Economic Advisors, David Ndii, the primary reason fueling KSH’s stability is labeled a phenomenon called “sunspots.”
Sunspots can be referred to as crucial external factors such as investor sentiment and reactions to non-economic events, strengthening the value of the Kenyan shilling and driving its prestige up against the USD.
Similarly, while identifying elemental triggers driving the value of KSH, it’s imperative to mention the oversubscription of the infrastructure bonds that first led the KSH rally to new levels.
The government of Kenya had earlier issued bonds worth 70 billion KSH but ended up receiving subscriptions worth 241 billion KSH. The nation is also experiencing a boost in its exports, primarily the tea vertical, which is booming on a sectoral level.
Is Kenyan Shilling Boosting the East African Currency Narrative?
With KSH booming and rising at a rapid pace, the financial experts and analysts on X have posted multiple opinions, one of which talks about KSH boosting the East African currency narrative.
The currency has noted an uptick of 16% against the USD this past year. In a statement issued by the World Bank, the agency listed reasons that are boosting the prospects of Kenyan shilling.
“In Kenya, securing funds to repay its EuroBond falling due in June 2024 restored confidence in the local currency.“
Similarly, the Ugandan Shilling has also been noting a surge in its valuation against the USD. Per Independant, the Ugandan shilling has strengthened against the USD, fluctuating between 3,767 and 3,815 to the US dollar in December 2023. At press time, USH is sitting at $0.00026.
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Will EAC Currencies Take Over?
The rise of Kenyan and East African currencies is posing a threat to the USD. However, the EAC’s collective effort to derail the USD as a global currency might still be a long haul for these nations to achieve and conquer. The US dollar, although weakened to an extent, is still considered a robust store of value that may continue to gain prominence in the near future.
However, its prestige and reputation as a global reserve currency may decline, as predicted by SEBI analyst Amit Kumar Gupta.
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Gupta shared that the share of global trade invoiced in USD is declining. Similarly, the USD reserves in central banks across the world have also been steadily falling.
“The share of global trade invoiced in USD terms is falling. The USD reserves of global central bankers have witnessed a consistent decline in recent years. Moreover, the cross-border flow of funds from the US has witnessed a sharp rise in FY24. Unsustainable US public debt has led to a downgrade of the US sovereign rating outlook in 2023. Besides, the trade conflict with China has led to a conspicuous shift of technological advantage from the US to China. These trends may consolidate the position of commodity-producing emerging economies, enabling them to seek favorable terms of trade.”