According to Analysts at Commercial Bank of Africa, the local currency gained against the major hard currencies through the trading session on the back of amplified inflows.
Market reports said some offshore investors had bid for the shilling at higher levels on Tuesday causing a stir from importers who were waiting to buy.
The shilling, which has remained largely unchanged since the start of the year is currently trading at 101.65 against 101.85 shillings to the US dollar.
This is even as analysts expect the shilling to remain flow driven.
The Kenya Shilling exchange rate remained broadly stable and competitive against major international currencies in 2018.
The Central Bank of Kenya posted a shilling mean-rate of Sh62.77 down from Sh63.57 on Tuesday with a buying rate of Sh62.48 and a selling rate of Sh63.07.
Against the dollar, the exchange rate has been relatively less volatile exchanging at Sh102.3 in December 2018 from Sh103.1 in December 2017.
Against the Euro and the Sterling pound, the Shilling also strengthened to Sh116.4 and Sh129.7 in December 2018 from Sh122.0 and Sh138.2 in December 2017, respectively.
A the Nairobi Stock Exchange some 392,000 shares worth Sh40.7 million were traded down from 718,000 shares worth Sh65.8 million traded on Tuesday.
The NSE 20 share index lost 10.97 points to close at 2973.17 with reduced prices noted on some counters.
The Industrial and Allied sector was the most active with 266,000 shares traded accounting for 68 per cent of the day’s traded volume
“The Kenya Shilling exchange rate has continued to display relatively less volatility, compared to most sub – Saharan Currencies. This stability reflects strong inflows from tea and horticulture exports, resilient diaspora remittances and improved receipts from services particularly tourism,” Treasury said in the Draft 2019 Budget Policy Statement.
Foreign exchange reserves have increased from around 3 months of import cover in 2003 to 5.6 month of import cover in 2018 which is above the statutory requirement of 4.0 months of import cover and thus remains adequate to safeguard against exogenous shocks such as terror attacks.
The official foreign exchange reserves held by the Central Bank improved to US$ 8,554 million (5.6 months of import cover) in October 2018 compared with US$ 7,574 million (5.1 months of import cover) in October 2017.
By end December 2018, the usable official reserves stood at US$ 8,001 million or 5.2 months of import cover.
Commercial banks holdings was at US$ 3,114 million in 2018 from US$ 2,357 million in 2017.