Forex bureaus in Kenya were established and first licensed in January 1995 to foster competition in the foreign exchange market and to narrow the exchange rate spread in the market.
The change was meant to eradicate an inefficient exchange control regime, eliminate price distortions and attract forex inflows. Today, buyers and sellers determine the foreign exchange rate, with the occasional intervention of CBK to influence economic direction.
Forex bureaus are regulated under Sections 33A to 330 of the Central Bank of Kenya Act (Cap 491) and Forex Bureau Guidelines. Currently, Kenya has 126 licensed forex bureaus in various towns in the country Nairobi 101, Mombasa 15, Malindi 2, Nakuru 2, Kismnu 2, Eldoret 2, Lokichoggio 1 and Namanga 1.
In 2010, the shilling stabilised at Sh80.75 to the US dollar, Sh124.76 to the Sterling pound and Sh107.63 to the euro. In the region, it appreciated to exchange at one shilling for 28.57 Ugandan shillings and 18.51 Tanzanian shillings. In 2011 the shilling depreciated sharply to an all-time low exchange rate of Shl07 to the dollar, before appreciating to 82 units at the end of the year.
Exchange Rate in Kenya
Exchange rate in Kenya: The Kenyan shilling weakened against most of the selected major trading currencies as reflected in the trade weighted exchange rate index, which rose by 1.9 per cent from 107.3 in 2010 to 109.3 in 2011.
Shilling Exchange Rate in Kenya
The depreciation of the shilling was attributed to the rapid rise in prices of imported manufactured goods, crude oil and mineral fuels imports, coupled with the economic slowdown in Europe (Euro crisis). In addition, a 38.9 per cent increase in the import bill vis-a-vis a relatively slow growth of 24.7 per cent of export earnings contributed to a higher trade deficit, which in turn contributed to the depreciation of the shilling. The shilling strengthened substantially against the South African Rand and Indian Rupee by 14.9 per cent and 6.7 per cent respectively, at the end of 2011.
Within the East African Community, the Kenyan shilling gained against all the EAC currencies. The shilling appreciated against the Rwandan franc, Uganda shilling and Tanzania shilling by 45.5, 3.2 and 1.6 per cent, respectively.