Pundit hedge against KSh.

[hk]

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Government is seeking $2.3b https://www.bloomberg.com/news/articles/2020-11-23/kenya-seeks-2-3-billion-loan-from-imf-to-help-economic-recovery?srnd=premium-africa , clearly shilling is going to depreciate further to maybe 115 to $. The simple hedge other than converting Ksh to USD is to buy commodities that are priced in USD. In my case coffee, for you buy tea. The commodities prices will appreciate as vaccine takes effect and also since you'll be buying ksh and selling in USD depreciation of Ksh will add to your margin, it might be a perfect hedge.

[RV Pundit]

yes vaccine bring some certainty but how certain. If I buy - I need to store somewhere. Without a futures commodity market sound like I will have to deal with thugs who might steal it/

[hk]

yes vaccine bring some certainty but how certain. If I buy - I need to store somewhere. Without a futures commodity market sound like I will have to deal with thugs who might steal it/

I don't know about the tea industry, but coffee futures are sold daily in international commodity exchanges e.g chicago or new york. The beauty of Kenya is that its still wild west. In coffee industry I just need to deliver my parchment coffee to the mill warehouse and its secure. As they wait to mill and for advice from us who to sell to.  Bottom line the economy is in free fall and government will be scrambling for USD. If you can secure something that price is pegged on usd, you're more likely to have a very good return.

[RV Pundit]

Interesting. Tea has global production glut. The rains gods have smile for too much . The prices are depressed and I don't see how it will improve.

I don't know about the tea industry, but coffee futures are sold daily in international commodity exchanges e.g chicago or new york. The beauty of Kenya is that its still wild west. In coffee industry I just need to deliver my parchment coffee to the mill warehouse and its secure. As they wait to mill and for advice from us who to sell to.  Bottom line the economy is in free fall and government will be scrambling for USD. If you can secure something that price is pegged on usd, you're more likely to have a very good return.

[hk]

Predictably the KSH has continued to weaken https://www.bloomberg.com/quote/USDKES:CUR officially now above 110. The forex bureaus are quoting average its about 113. Meanwhile CBK is depleting forex reserves at a very rapid rate. If kenya doesn't enter an IMF/world bank restructuring program soon, we might be in uncharted territory soon.   

[RV Pundit]

Yes saw down to 7B dollars forex reserve..Opus Dei Njoroge about to face baptism by fire. Soon importers will not have dollars. They might start to ration it - for critical imports. Well unless they get 4B from IMF/WB - to keep us going for a few months.

Predictably the KSH has continued to weaken https://www.bloomberg.com/quote/USDKES:CUR officially now above 110. The forex bureaus are quoting average its about 113. Meanwhile CBK is depleting forex reserves at a very rapid rate. If kenya doesn't enter an IMF/world bank restructuring program soon, we might be in uncharted territory soon.   

[hk]

CBK is trying to hold down Kes depreciation and reserve forex https://www.businessdailyafrica.com/bd/markets/currencies/confusion-hits-banks-over-dual-dollar-rate--3215748 . The CBK rate will be rendered meaningless if its not being honored by banks. Back in 1992 there was something called forex certificates that importers bought at CBK determined rate. That rate was significantly lower than prevailing black market rate. Now we have the market rate for banks and forex bureaus, if market refuses to buy at CBK rate, CBK will have to capitulate soon. After all no one buys dollars from CBK.

[RV Pundit]

Surreal - we will have two rates and black market. Njoroge should let Kshs slide - it's inevitable - and wait for post COVID recovery.

CBK is trying to hold down Kes depreciation and reserve forex https://www.businessdailyafrica.com/bd/markets/currencies/confusion-hits-banks-over-dual-dollar-rate--3215748 . The CBK rate will be rendered meaningless if its not being honored by banks. Back in 1992 there was something called forex certificates that importers bought at CBK determined rate. That rate was significantly lower than prevailing black market rate. Now we have the market rate for banks and forex bureaus, if market refuses to buy at CBK rate, CBK will have to capitulate soon. After all no one buys dollars from CBK.