Kenya's shilling is losing ground after an extended stretch of stability, weighed down by rising dollar demand from oil marketers and other importers, according to CNBC Africa. Commercial banks in Nairobi quoted the currency at 129.75/95 per dollar on Thursday, the same level as a week earlier, the outlet reported.
In Uganda, the shilling could weaken further even after the Bank of Uganda raised its benchmark interest rate by 2.25 percentage points in an emergency move this week, CNBC Africa reported. The hike gave the currency an immediate boost on Wednesday, but traders told the outlet that softer export earnings and expensive energy will soon push it back down.
"I would think the shilling will continue weakening driven by the same fundamentals, but possibly the depreciation will be at a much slower pace," one trader said, according to CNBC Africa.
Ugandan commercial banks quoted the shilling at 3,990/4,000 to the dollar on Thursday, compared with 4,080/4,090 at the close of the previous week.
Why it matters
East Africa's two largest economies sit at the center of a broader currency story playing out across the continent. When importers rush to buy dollars, local currencies weaken, and that feeds into the cost of fuel, manufactured goods and food brought in from abroad. For households already stretched by high prices, a softer shilling can translate into higher bills at the pump and in the market.
The pressure also shapes how central banks set policy. Uganda's rate increase was framed as a response to currency weakness stoking inflation, according to the Daily Monitor. That decision rippled through foreign-exchange markets quickly — Business Insider Africa reported that the Ugandan shilling led global currency markets after the hike, an unexpected win for the East African economy. Yet traders quoted by CNBC Africa suggest that advantage may be short-lived without stronger export earnings to back it up.
Kenya's situation is different in detail but similar in direction. The shilling had held steady for a long stretch, and the renewed slide reflects demand from oil marketers and general importers rather than any single shock. Inflows from charitable organizations could soften the losses, CNBC Africa reported, but they are unlikely to reverse the trend on their own.
A mixed picture across African markets
The two East African currencies are not moving in isolation. CNBC Africa's roundup of African foreign-exchange markets shows a region where some currencies are finding support while others struggle.
Ghana's cedi is expected to build on this week's gains, lifted by strong foreign-exchange inflows from the mining sector and better liquidity in the interbank market. Andrews Akoto, head of trading at Absa Bank Ghana, told the outlet that mining-sector inflows are outweighing demand from local corporate accounts.
"The cedi is likely to extend its rally against the dollar in the coming week, as strong mining-sector FX inflows outweigh demand from local corporate accounts," Akoto said, according to CNBC Africa.
Zambia's kwacha is seen holding steady. Companies raising local funds to meet month-end obligations will be selling hard currency, which should offset persistent demand from importers. Commercial banks were selling one dollar at 20.18 kwacha on Thursday, against 20.23 a week earlier.
"Despite persistent pressure arising from (foreign-currency) demand from importers, corporates will also be selling dollars to pay salaries and other month-end dues," a financial analyst said, according to CNBC Africa.
Nigeria's naira may trade broadly flat, supported by dollar sales from the Central Bank of Nigeria and foreign inflows. The currency was quoted at 1,329 to the dollar on the official market on Thursday, barely changed from 1,331 a week earlier. On the street, it was changing hands at around 1,375.
"We expect to see a broadly stable naira in the coming week, largely due to the Central Bank of Nigeria dollar sales," a trader said, according to CNBC Africa.
What traders are watching
The common thread across these markets is the balance between dollar demand and dollar supply. In Kenya, demand from fuel importers is the immediate driver, with charity inflows providing only partial relief. In Uganda, the central bank has already used its main tool — a sharp rate increase — and traders still expect the currency to drift lower.
That suggests the rate hike bought time rather than solving the underlying problem. Higher borrowing costs can attract yield-seeking capital and cool inflation, but they do not fix weak export receipts or expensive energy imports. Until those fundamentals shift, the shilling's path of least resistance may remain downward, even if the pace slows.
For Kenya, the question is whether the recent stability was a plateau or a pause. The shilling's unchanged week-on-week quote against the dollar masks the demand building beneath the surface, and importers' appetite for hard currency tends to grow as the year progresses.
Investors and businesses operating in the region will be watching the next few sessions for signs of whether Uganda's post-hike rally holds and whether Kenya's shilling breaks out of its recent range.
