Shilling To Bear Brunt Of Politics, Oil Prices
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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.