Macroeconomic Forecast Kenya

The Kenyan shilling has depreciated significantly against the US dollar in recent months. As trade with east Africa has picked up in 2010, Kenya's import bill, which is largely funded with US dollars, has grown considerably. Meanwhile, risk aversion in developed markets has slackened demand for seemingly higher risk investments in less established emerging markets like Kenya, which has put downward pressure on the shilling. That said, the shilling has found support at KES81.00/US$ in July. We believe that the currency will now trade sideways between KES80.00/US$ and KES82.00/US$ in the short term, but that Kenya's strong macroeconomic fundamentals will help push the currency up in value to around KES78.00/US$ by the end of 2010.

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