Bank of Uganda saves ‘ailing’ shilling

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The Uganda shilling strengthened marginally, primarily supported by Central Bank mopping up of excess liquidity in the money markets amidst low demand for the greenback.
Trading was in range of 3610/3620.

In the coming week, Bank of Uganda will hold the final Monetary Policy Meeting for 2017. It is likely that the Central Bank will continue with its easing cycle basing on the inflation outlook that remains well anchored as well as concerns over the modest recovery of private sector credit.- A 50 basis points cut is likely.
In the fixed income space, BOU auctioned 140 billion in treasury bills, yields declined to 8.248%, 8.476% and 9.108% for 92,182 and 364 day respectively.

Market view suggest that the rates at short end of the curve are about to bottom out.
In the regional markets, the Kenya shilling was stable, but expected to weaken on account of increased importer dollar demand. Trading range was 102.70/95

Global Markets: the US dollar rose to a two week high against the major currencies on strong risk appetite and optimism the US will push through the tax reforms. Markets were also waiting for the US job report for November that would also provide clue on the direction of the dollar.
In commodities markets, oil price was up after data showed a decrease in US crude inventories. International benchmark price barrel traded at $61.49.

Outlook for the shilling

The shilling is likely to trade strong and could test the support level of 3600.

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Seasonal inflows will play a significant factor in keeping the shilling rally alive coupled with a slowdown of market demand as the holidays get closer.

The BOU open market operations will also be key in supporting the shilling.

The writer works with Alpha Capital Forex Bureau: For competitive Forex Rates call: 0414-580619, 0392-612648

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