The Kenyan shilling ended the week weaker against the US dollar as rising oil prices and a stronger dollar increased pressure on the local currency. The Central Bank of Kenya (CBK) also warned that the country’s current account deficit could widen in 2026, partly due to higher fuel import costs.
The shilling closed at KSh129.91 against the dollar on Friday, down 0.12% from Monday’s opening rate of KSh129.76, according to CBK data.
However, the local currency gained against the euro, strengthening by 0.19% to close at KSh145.92 from KSh146.20. The British pound, meanwhile, rose to KSh172.04 from KSh171.76 over the same period.
The currency movements came as Brent crude oil prices climbed above $105 per barrel amid renewed disruptions to shipping in the Middle East. At the same time, the US Dollar Index rose above 102, supported by higher US Treasury yields and expectations of further monetary tightening by the Federal Reserve.
Higher oil prices could increase Kenya’s demand for foreign currency because the country relies on imports to meet much of its fuel needs.
On Wednesday, the CBK retained its benchmark interest rate at 8.75%. However, it projected that the current account deficit would widen to 3.2% of gross domestic product (GDP) in 2026, up from 2.1% in 2025, partly due to increased fuel imports and weaker remittances.
The country’s foreign exchange reserves also declined during the week. CBK data showed that reserves stood at $14.702 billion on October 7, equivalent to 5.9 months of import cover, down from $14.93 billion recorded on October 1.
Despite the decline, the central bank expects capital inflows to more than finance the projected external deficit. However, continued increases in oil prices and sustained strength in the US dollar could add further pressure on the shilling.
Market conditions in the coming weeks will therefore depend partly on developments affecting Middle East oil supplies, changes in US monetary policy and the level of foreign currency flowing into Kenya.