If i was to use the balance of payment (BoP) valuation model to value the Shilling its OVERVALUED at the current exchange rates unless the BoP shrinks due to the current tightening I will buy USD in 2012.

Kinyua & co know it, no bank global bank will lend Kenya. Most of them are smouldering after writing off Greek sovereign debt. Ample examples of defaults by states exist - Argentina, mexico, Pueto Rico etc.

Unless you are Nigeria holding USD reserves or Botswana sitting on Diamond surpluses, there is no sane bank that will lend a 3rd world african government at this time. In any case our BoP, capital account and Total debt / GDP ratios are scary.

As for the currency, poor clueless MPs, they are sitting earning our money listening to Baloney from bank executives on why the KES lost value. Everyone knows the Eurozone issues have nothing to do with our currency. There is minimal linkage. Banks severely screwed the economy to make easy money with the blessings of Ndung'u. 4 things have fixed the KES, the regulation of USD balances held by banks, taking positions in the market, increasing the CRR and offering USD to oil importers. All these were options available as early as May.

@Kizee - I have another blasphemous scenario for you similar to the USDKES to test 90/- call.

What happens when 91, 182 & 364 day tbills rates surpass the 2yr bond yields... Something Greece has demonstrated very nicely this year as the yield curves inverted...

There is also the BIG hidden hand of China in the the economic mess we are in.......Now I see why SA and other right thinking African countries are hesitant to open all the doors without conditions to China. I am not saying Chinese investment is bad but the way have done it is extremely wrong.......it has to be very controlled...