Kenyan Shilling (Ksh) continues to send economic shock waves as it depreciates against the US dollar.
As of Friday, March 17, the Ksh was trading at a high of Ksh140 against the dollar indicating a depreciation of the Kenyan legal tender which on January 2020 was trading at Ksh99.
Despite the weakening of the Ksh against the dollar, the currency maintained its dominance as one of the most sought-after legal tender in the African continent based on XE Currency Popularity Rankings.
According to the ranking, Ksh was only bettered by the South African Rand in terms of popularity.
The Ksh further performed remarkably well globally after being ranked 36th while the South African Rand was ranked seven globally.
In East African Community, Uganda was the second most popular currency, ranked 88 globally.
Other EAC countries ranking were; Tanzania (108), Rwanda (145), and Burundi (153).
Democratic Republic of Congo (DRC) did not feature in the ranking while South Sudan was ranked using Sudan Dinars which was ranked 134 globally.
Popularity ranking is a scale used to determine the most preferred currencies for trading.
According to International Monetary Fund (IMF), the more popular a currency is, the more useful it is to those who hold it.
For example, according to the XE Currency Popularity Ranking, an international investor trading in Uganda would prefer to be paid in Ksh instead of Ugandan Shilling (Ush).
According to IMF, once a currency becomes popular, it takes years to lose its ranking in the international market,
“Even if individuals should have the incentive to switch to another currency, they would have to convince many other agents to make the same switch before it would become worthwhile to do so,” IMF explains why Ksh will continue being a force in the continent.
IMF further explains what makes a currency popular compared to others in the regional and international markets.
“First, there needs to be confidence in its value and, therefore, in the issuing country’s inflation performance,” IMF states.
The monetary fund adds that there needs to be confidence in the political stability of the issuing government for a currency to gain popularity.
Kenya has been one of the most politically stable countries in Africa after three peaceful transitions of power.
“Lastly, the issuing country should possess financial markets that are substantially free of controls, broad (that is, containing a wide variety of financial instruments), and deep (that is, having well-developed secondary markets),” IMF explains.
The top five most popular global currencies include; the US Dollar, Euro, the UK Pound, India Rupees and the Australian Dollar.
By Kioko Nyamasyo, Kenya
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