Shilling To Bear Brunt Of Politics, Oil Prices

July 2008 | Currency Forecast

The Kenyan shilling's fall through the key KES66.50/US$ support level is a negative technical signal, setting up further potential losses to KES70.00/US$. The unit traded at KES66.69/US$ at one point on July 10. A key factor determining the shilling's short-term moves will be the political backdrop, in particular the ongoing probe into the allegedly corrupt activities of Finance Minister Amos Kimunya - any findings of malpractice, and associated ructions in the coalition government will likely cause the shilling to sell off. A sustained break to the weak side of KES70.00/US$ could presage further falls toward the KES72.00/US$ region. On the upside, we will be watching short-term trendline resistance at KES66.00US$: a push through this level could usher in a renewed period of sideways trading. However, we believe that further upside is unlikely in 2008, for reasons highlighted below.

If you would like to subscribe to Emerging Markets Monitor and gain instant access to this article, please click here to subscribe.

If you would like to take a trial to Emerging Markets Monitor please click on the trial link below.