The Effect of Foreign Exchange Exposure on the Financial Performance of Commercial Banks in Kenya

Abstract- Exchange rate movement in Kenya has been variable with periods of rapid depreciation of the domestic currency Kenya Shilling, which adversely affect the Kenyan economy. Even though studies have been conducted on the exchange rate regimes and the implications for macroeconomic management as well as managing foreign exchange risk, very little has been done on the study of the firm exposure to exchange risk in Kenya. It is in this context that this research was to evaluate the effects (if any) that variations in the exchange rate has in the financial performance of the selected listed commercial banks in Kenya in the Nairobi Stock Exchange. The overall objective of the study is to find out the effect of foreign exchange exposure on commercial bank performance. The research used both secondary and primary data. The study utilized descriptive design. Data was analysed using Statistical Package for Social Sciences (SPSS)