Kenyans have been taking advantage of the depreciation of the Kenyan shilling by making profits from foreign exchange trading. However, speculative trading is prohibited by the Central Bank of Kenya. It is important to note that traders must fund their accounts in Kenyan shillings. These deposits are then converted to US dollars and profits can be withdrawn to their M-Pesa wallets.
Online forex trading
Forex trading is a popular investment option in Kenya. Prior to the global pandemic, the country’s economy was among the fastest growing and most stable in Africa. Between 2015 and 2019 the country’s GDP grew by an average of 5.7% per annum, though the pace is expected to slow down slightly in 2020. Even with the slowdown, the economy is in recovery mode, and the outlook for the country is positive.
Macroeconomic policies
In a country like Kenya, there are numerous ways of managing exchange rate trading. One of the ways is to implement a floating exchange rate regime. This means that the value of the Kenyan currency adjusts in relation to other currencies, primarily based on market forces and economic factors. However, the Central Bank of Kenya can intervene to control the exchange rate in extreme cases.
Exporters
In the early 1990s, Kenya embarked on a series of reforms to improve its business environment. These measures included eliminating price controls and quantitative restrictions, and reducing the overall level of protection for its economy. It also made significant changes to its tariff structure, reducing tariff bands and limiting the administrative discretion.
Foreign exchange reserves
Foreign exchange reserves in Kenya have sunk to an all-time low. This is due to the deteriorating value of the shilling against the dollar. This is a concern since Kenya’s imports have been increasing in recent months. The weakened shilling makes imports more expensive.
Central banks
The central banks in Kenya have been selling dollars in the foreign exchange market on Monday to prop up the shilling. This is a measure that could have a negative effect on the shilling.
Risks
Kenya’s banking sector is the backbone of the country’s economy, and it carries substantial foreign exchange risks. Managing these risks is crucial to a successful banking system. To mitigate the risks, banks use standard tools such as foreign exchange swaps and options contracts.
