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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