Kenyan Shilling Experiences Marginal Decline Amidst Mixed Equity Market Performance

The Kenyan shilling exhibited slight depreciation against major global currencies on March 4, 2025, reflecting nuanced shifts in the country’s foreign exchange landscape. Concurrently, the Nairobi Securities Exchange (NSE) presented a mixed performance, underscoring the dynamic nature of Kenya’s financial markets.

Currency Market Movements

On March 4, 2025, the Kenyan shilling weakened marginally against key international currencies:

USD/KES: The shilling depreciated by 0.04% to close at 129.20, marking a year-to-date change of 0.07%.

GBP/KES: A more pronounced decline of 0.77% was observed, with the shilling closing at 164.04, translating to a year-to-date decrease of 1.09%.

EUR/KES: The shilling weakened by 0.74%, ending the day at 135.41, reflecting a year-to-date drop of 0.84%.

These fluctuations indicate the shilling’s sensitivity to global currency movements and domestic economic factors.

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Equity Market Performance

The NSE’s performance on the same day showcased a blend of resilience and caution:

Total Equity Turnover: There was a significant increase of 19.19%, with the turnover rising to USD 2.56 million (KES 277.01 million) from the previous day’s USD 2.14 million.

NSE 20 Index: This benchmark index experienced a modest uptick of 0.57%, closing at 2,306.85 points.

Nairobi All Share Index (NASI): In contrast, the NASI eased by 1.17%, ending at 131.04 points.

The divergence between the NSE 20 and NASI suggests varied performance across different market segments.

Foreign Investor Activity

Foreign investors played a pivotal role in the day’s trading dynamics:

Market Participation: They accounted for 42.85% of total market purchases and 54.86% of total market sales, resulting in a net selling position.

This trend aligns with recent patterns observed in the NSE. For instance, in February 2025, foreign investors maintained a net selling stance, offloading stocks worth KES 1.2 billion, bringing the cumulative net sales to KES 4.8 billion since the year’s onset.

Broader Economic Context

Several factors have influenced these market movements:

Monetary Policy: The Central Bank of Kenya (CBK) has been proactive in adjusting monetary levers to stimulate economic growth. Notably, in early February 2025, the CBK reduced its main interest rate by 50 basis points to 10.75%, marking the fourth consecutive rate cut. This move aims to bolster lending and invigorate economic activities.

Foreign Exchange Reserves: Kenya’s foreign exchange reserves have remained robust, hovering around $9 billion, equivalent to over four months of import cover. This stability is attributed to strong remittance inflows, which have cushioned the shilling against external shocks.

Global Aid Dynamics: The recent freeze on foreign aid by U.S. President Donald Trump raised concerns about potential impacts on the shilling. However, CBK Governor Kamau Thugge expressed confidence that the aid suspension would have minimal effect on the currency, citing the nation’s healthy forex reserves.

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