Speculation risky for the individual

In Summary

• The Kenya shilling has appreciated from 162 to the US dollar to 143 to the dollar

• Early repayment of the Eurobond has removed the risk of sovereign default

The shilling has appreciated from 162 to the US dollar to 143.

While it depreciated, prophets of doom were predicting the end of the world. Now they are silent.

Some forex bureaus are also squawking that they have lost money but they were speculating, holding US dollars hoping that they would get more shillings in future.  Instead they got less shillings and made losses. Moreover they did not complain last year when the cost of the dollar was increasing rapidly and they were making super-profits.

There forex traders should remember that any market can go up as well as down. The shilling may drop back to 163 to the dollar, or it may go to 120 as predicted by the President. They should cover their positions.

The immediate cause for the appreciation of shilling is the  repayment of $1.5 billion of the $2 billion Eurobond, which has removed local and International fears of a Kenyan sovereign default. Suddenly the shilling looks much stronger.

Speculation  is healthy from a macro-economic point of view because it smoothes out fluctuations in the market. But speculation is very risky for the individual. It is like gambling, you lose as easily as you win.

Quote of the day: "A society that has more justice is a society that needs less charity."

Ralph Nader
The American lawyer was boen on February 27, 1934

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