Sharp Daily
No Result
View All Result
Thursday, August 28, 2025
  • Home
  • News
    • Politics
  • Business
    • Banking
  • Investments
  • Technology
  • Startups
  • Real Estate
  • Features
  • Appointments
  • About Us
    • Meet The Team
Sharp Daily
  • Home
  • News
    • Politics
  • Business
    • Banking
  • Investments
  • Technology
  • Startups
  • Real Estate
  • Features
  • Appointments
  • About Us
    • Meet The Team
No Result
View All Result
Sharp Daily
No Result
View All Result
Home Economy

The mechanics of currency manipulation

Hezron Mwangi by Hezron Mwangi
June 27, 2025
in Economy, Explainer
Reading Time: 2 mins read

Currency manipulation, a term that stirs heated debate in global trade, refers to a nation’s deliberate efforts to alter its currency’s value for economic advantage. Recently, the United States has pointed a cautious finger at Kenya, questioning whether its management of the Kenyan shilling crosses into manipulation. While no formal accusation has been made, the concern invites a deep dive into how currency manipulation works, using Kenya as a lens to unpack its methods, motives, and consequences.

At its core, currency manipulation involves a government or central bank intervening to skew a currency’s value, often to boost exports or stabilize markets. A weaker currency makes a country’s goods cheaper abroad, giving exporters an edge, while a stronger currency lowers import costs but can hurt trade competitiveness. The Central Bank of Kenya (CBK), holding USD 10.9 billion in reserves as of 20th June 2025, employs several tools to manage the shilling, drawing scrutiny for their impact on trade with the U.S.

The primary method is direct market intervention. By selling shillings, the CBK increases supply, driving down the currency’s value. For instance, a weaker shilling could make Kenyan tea cheaper in global markets, undercutting competitors. Conversely, buying shillings with dollar reserves tightens supply, strengthening the currency to curb inflation or ease Kenya’s dollar-denominated debts, like Eurobonds. These actions, intended to stabilize Kenya’s economy, can appear manipulative if they consistently favor exports, creating trade imbalances that concern partners like the U.S.

Interest rate adjustments offer another tool. Lowering rates discourages foreign investors, reducing demand for shillings and weakening the currency. Raising rates attracts capital, bolstering the shilling but risking slower growth in Kenya’s agriculture and tourism-driven economy. The CBK’s recent rate cuts reflect this delicate balance, but aggressive shifts could signal manipulation. Capital controls, limiting foreign access to shillings, can also manipulate value by controlling demand, though Kenya’s open market leans away from this tactic.

RELATEDPOSTS

Kenya’s strategic debt pivot: Smoothing, Strengthening, Sustaining

August 27, 2025

Bank on your paycheck: Invest smart with CMMF

August 26, 2025

Some nations peg their currency to the dollar, requiring relentless intervention to maintain a fixed rate. Kenya uses a managed float, allowing market forces some play, but its active interventions raise questions, especially as Kenya’s trade surplus with the U.S. grows. Reforms like the Kenya Foreign Exchange Code aim for transparency, yet frequent market tweaks fuel U.S. suspicions.

Manipulation has trade-offs. A weaker shilling risks inflation, squeezing Kenyan households, while an overly strong shilling could cripple export sectors like flowers, costing jobs. Globally, manipulation distorts trade, prompting U.S. vigilance under its “America First” trade stance. Kenya’s actions, shaped by commodity price swings and debt pressures, likely prioritize stability over unfair advantage. Yet, as Kenya explores non-dollar trade systems like Pan-African Payment and Settlement System (PAPSS), the U.S. sees a challenge to dollar dominance, amplifying concerns.

Kenya’s currency strategy navigates survival in a volatile global economy, not deliberate trade distortion. Still, the U.S.’s scrutiny highlights a tension: one nation’s economic defense can look like another’s trade offense. Without clear evidence, this debate risks straining a vital partnership.

Previous Post

Understanding how to access your pension savings in Kenya.

Next Post

Private vs Public Pension Funds in Kenya

Hezron Mwangi

Hezron Mwangi

Related Posts

Economy

Strategies for Nairobi to emerge as Africa’s financial hub

August 22, 2025
Economy

Steps banks can take to align with fair lending practices

August 7, 2025
Analysis

The hidden cost of outdated economic statistics

August 7, 2025
Analysis

The functional role of narrative in financial markets

August 1, 2025
Economy

Tanzania’s protectionist shift and what it means for Kenyan entrepreneurs and regional trade

July 31, 2025
Economy

How Kenya can reinforce fiscal rules to prevent recurrent budget overruns

July 23, 2025

LATEST STORIES

Kenya’s strategic debt pivot: Smoothing, Strengthening, Sustaining

August 27, 2025

Bank on your paycheck: Invest smart with CMMF

August 26, 2025

Finding Balance: My Journey with Internet Self-Care

August 22, 2025

Why Young Kenyans Cannot Afford to Ignore Private Pensions

August 22, 2025

Strategies for Nairobi to emerge as Africa’s financial hub

August 22, 2025

Understanding NSSF and the Two-Tier Contribution System

August 22, 2025

Kick financial goals: Invest with CMMF this football season

August 22, 2025

AI and the future of investment research

August 22, 2025
  • About Us
  • Meet The Team
  • Careers
  • Privacy Policy
  • Terms and Conditions
Email us: editor@thesharpdaily.com

Sharp Daily © 2024

No Result
View All Result
  • Home
  • News
    • Politics
  • Business
    • Banking
  • Investments
  • Technology
  • Startups
  • Real Estate
  • Features
  • Appointments
  • About Us
    • Meet The Team

Sharp Daily © 2024