Nairobi: The Kenyan shilling gained marginally against the US dollar on Friday, supported primarily by steady inflows from remittances. Despite this positive momentum, the currency's rise remains constrained due to consistent demand for dollars from importers, underlining the tug-of-war between foreign income and expenditure in the East African nation’s foreign exchange market.

According to quotes from commercial banks early on Friday, the shilling was trading at 128.80/129.30 against the US dollar, improving slightly from Thursday’s closing level of 129.00/129.50. Though this appreciation is modest, it reflects the resilience of remittance inflows, which have become one of Kenya’s largest sources of foreign exchange — surpassing earnings from traditional sectors such as tea, coffee, and tourism.

Remittances from Kenyans living abroad continue to play a crucial role in stabilizing the currency. Diaspora communities send billions annually to support families, invest in real estate, education, and small businesses. The consistent flow of these funds helps buffer the country’s balance of payments and provides much-needed liquidity in the forex market.

In times of global volatility, remittances have proven relatively stable, particularly when compared to export revenue which is often affected by weather conditions, commodity prices, or global demand. Analysts suggest that May saw stronger-than-expected remittance volumes, contributing to the slight firming of the shilling.

Despite this support, the shilling continues to face downward pressure from high demand for US dollars by local importers. As Kenya remains heavily reliant on imported goods — including fuel, machinery, raw materials, and even basic consumer goods — the private sector’s need for foreign currency remains significant.

Currency dealers indicate that importers are particularly active at the end of the month, driven by payment cycles and logistical schedules. This activity keeps demand for dollars high, countering the stabilizing effect of remittances.

While the Central Bank of Kenya (CBK) has maintained a cautious monetary stance to support currency stability and control inflation, macroeconomic challenges persist. Kenya’s public debt burden, fiscal deficits, and exposure to global oil price fluctuations continue to influence the forex market’s sentiment.

Moreover, investor sentiment plays a role — fluctuations in external financing, such as Eurobond repayments or IMF programs, can sway confidence and impact the exchange rate.

Market analysts warn that while the current stability in the shilling is welcome, it remains fragile. The CBK may have to intervene in the market if pressures intensify, particularly if global interest rates shift or if geopolitical events impact remittance flows or commodity prices.

For now, the shilling's slight gain is a reflection of short-term inflows, but sustaining such stability will require structural improvements — including enhanced export competitiveness, diversification of forex sources, and prudent fiscal management.

The Kenyan shilling’s slight appreciation today offers a glimpse of economic resilience, thanks largely to its diaspora. However, persistent import demand and broader economic vulnerabilities mean that this strength may be temporary unless deeper economic reforms take hold.