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By Stephen Kaboyo

The Uganda shilling was on the back foot in the first full trading session of the year, inching lower as both global and domestic market dynamics weighed in.

Locally, foreign exchange flows were scanty as export flows were expected to under perform while the end of year Diaspora flows were not significant.

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The unit shed off close to Ugx. 35/= during the week to trade in the range of Ugx. 3625/35.

In the first treasury auction of the year, the benchmark 91 together with the 182 day went up slightly to trade at 13.409% and 14.628% respectively, while the 364 day declined at 15.501%, where a total of 165 billion was on offer.

In the international currency markets, the US dollar hit a 14 year peak against the major currencies as investors took their bets on the greenback.

 

The  dollar rally was fueled by expectation that the Trump incoming administration is likely to cut taxes, boost fiscal spending and carry through with it’s trade protectionist policies.

Going forward, the shilling will remain vulnerable to the domestic macro economic imbalances and the global dollar strength, as these two factors will continue to place the currency at risk of weakening further.

 

The writer works with Alpha Capital Partners

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