USD carry trade Kenyan style...

Think about it. To speculate against a currency - like the dollar - you need to be able to borrow that currency freely and cheaply.

Now look at what the Fed is providing to the markets: unlimited amounts of dollars at close to zero cost.

The observation comes from Reuters columnist John Kemp, who reckons that by cutting rates to nil, promising to hold them there for the foreseeable future, and promising to maintain plentiful interbank funding and liquidity, the Fed has in effect created a one-way bet against the dollar.

There’s another wrinkle stemming from the Fed’s ‘alternative’ approach to monetary policy — the huge rally in US treasuries has provided the perfect opportunity for long-term holders - like China’s State Administration for Foreign Exchange - to take a few profits. In fact, the Chinese may be one of the few participants in financial markets generally to have turned a profit over recent weeks.

The trouble of course, is that from a RMB-perspective, the dollar’s fall has probably wiped out all the gains.

Still, the dollar was pretty stable on Thursday morning - standing at 87.84 against the yen. But what’s this?

Kenya shilling firms vs dollar

NAIROBI, Dec 18 (Reuters) - Lacklustre dollar demand amid good greenback flows from agricultural exporters, aid agencies and Kenyans abroad lifted the Kenya shilling on Thursday, and dealers expect it to remain firm to the year’s end. At 0815 GMT, leading commercial banks traded the unit at 76.60/70 per dollar from Wednesday’s close of 76.80/90.

“There’s not much demand in the market and activity is slow,” said Benson Kaburu, a dealer at Standard Chartered Bank. “There are increased dollar inflows from exporters and NGOs.” Dealers at the Bank of Africa said in a report remittances by Kenyans outside the country would boost the local unit.

“We still expect the local unit to continue gaining albeit gradually aided by lacklustre demand and some strong selling interest from NGOs and light repatriations from the diaspora,” they said.

Traders say the shilling in a range between 76.00 and 77.00 to the year end.

http://www.reuters.com/article/etfNews/idUSLC51611720081212