From late 2022 to early 2024, the Kenyan Shilling (KES) tremendously lost its value against the United States Dollar (USD).
This loss in value saw the Kenyan Shilling trading at an all time low, with the worth of USD 1 rising over KES 160. Between December 2022 and January 2024, the Kenyan Shilling depreciated by approximately 30%.
What is Currency Depreciation?
A currency depreciation refers to the decline in the value of a country’s currency, relative to the value of another country’s currency. To evaluate the value or strength of a country’s currency, the USD is the most commonly used benchmark globally. This is due to the USD’s high demand, stability, and its universal use and acceptability during trading transactions.
What Does a 30% Kenyan Shilling Depreciation Mean?
A 30% KES depreciation implies that a holder of Kenyan Shillings will have to spend 30% more than they would a year ago, to purchase the same quantity of dollars. In December 2022, 1 dollar was trading at approximately 123 Kenyan shillings. In January 2024, a dollar is trading at 160 Kenyan shillings on average.
You needed about KES 123,000 to buy USD 1,000 in December 2022 while in January 2024, you needed a minimum of KES 160,000 to buy the same quantity of dollars. In addition, any amount of Kenyan Shillings held in December 2022 and not invested, had lost 30% of its value by January 2024. If you had KES 100,000 in December 2022 and have held onto it, its value in January 2024 was KES 70,000.
What has Been the Impact of this Depreciation?
Kenya relies heavily on imported goods and services, most of which, their prices have increased. This has led to the rise in the cost of living, an effect felt by most Kenyans if not all.
Another impact has been the loss in the value of wealth, as depicted in the illustration above where an univested KES 100,000 had lost its value to KES 70,000 in about a year.
Preventing currency depreciation might be out of your control, but protecting your wealth is within your reach. Having a dollar fund is one of the ways to protect your wealth from the aftermath of currency depreciation.
What is a Dollar Fund?
This is a fund denominated in USD. This fund invests in asset classes that have the potential for capital appreciation, and the capacity to earn interest income. As such, the value of the fund increases when the value of the underlying assets rises.
What is the Aim of a Dollar Fund?
✔ Diversifying currency.
✔ Capital preservation.
✔ Offer stability by minimizing risk.
What are the Advantages of Investing in a Dollar Fund?
✔ Security
✔ High liquidity
✔ Aggressive returns
✔ Expert fund management
From the benefits highlighted above, it is evident that with the robustness of the USD, a dollar fund offers the chance to achieve increased returns while safeguarding investments from currency depreciation.
