Why do exchange rates for USD to KES fluctuate so much?

The exchange rate between the US Dollar (USD) and the Kenyan Shilling (KES) can fluctuate due to a variety of economic factors, which can significantly impact remittance businesses. One key reason for fluctuations is the balance of trade. When Kenya imports more than it exports, demand for foreign currencies rises, affecting the USD/KES exchange rate.

Another factor is inflation. If inflation rates in Kenya are higher than those in the United States, the value of the Kenyan Shilling tends to decrease relative to the USD, causing fluctuations in exchange rates. Additionally, market sentiment and geopolitical events can influence the flow of capital, further impacting the exchange rate.

For remittance businesses, these fluctuations can present both opportunities and challenges. A weak KES may increase the value of remittances sent to Kenya, providing a boost to recipients. However, frequent fluctuations can create uncertainty, making it difficult for businesses to offer stable rates. Understanding these dynamics is essential for anyone involved in international money transfers.

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