When it comes to predicting, or forecasting, the part played
by intuition is incomparable to that played by any other factor. Yet there is
always a point in considering all the factors at hand. In this case, conventional
wisdom has it that the more factors are taken into account the more accurate
the prediction is likely to be. Save in fair gambling where one must eventually
apply closed eyes guesses, the world of business has most of its future influenced
by the cost of money. There is no a hen-egg relationship between stock prices
and exchange rates and the performance of the goods markets. Contrary, there is
a causal relationship in which the prices of stocks and the shilling are a reflection
of the underlying goods and services markets. This is why a statement like “the
central bank will take measures to curb speculation of the shilling” are very
sensitive to any Kenyan investor. As a matter of fact, the statement may be an
enough measure on its own or it may serve to worsen the situation.
The value of the Kenyan shilling has been falling for some
time now. The tendency of buying the dollar in anticipation of a further rise
to sell is what speculation entails. It’s not a sin, but if not curbed is likely
to devalue the shilling as more purchases and sells justify themselves in
actuality. Generally, as many people hold the dollar anticipating for its price
to rise, there action is justified in actuality because by holding, they create
a scarcity that will eventually rise the price of the dollar. On the other
hand, people transacting internationally are unwilling to hold a shilling that
is continuously losing value. The end result will be lower values of the
shilling against the dollar.
With this narrative, different entities walk in the streets
with different intentions of using the knowledge acquired. The legislator, or
the government is looking for means of using this information in eliminating
the speculative tendencies so that the shilling reacts to the market changes
only. The other group of players are the financial institutions that are
salivating at this opportunities but are scared of the suspicious eyes closely cast
on them by the legislator. They have high potential of benefiting from the
speculation if they transact on a large scale but that amounts to biting the
hand that feeds them. The group I always admire are the investors and
speculators who hope that the legislator holds for just one day for an extra
point rise. Lastly, there are the masses who just don’t know where the hell the
ship is heading to until the unfriendly tides of high prices and interest rates
come calling. Then, the speculators will be lending from their harvest at
exorbitant rates.
However, with the central bank threat to curb speculation we
are likely to see lesser speculation if not reversed one as speculators await
the value of the Ksh to rise.
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