Shilling to trade in bearish territory

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The Uganda shilling traded in volatile mode opening steady then ceding ground mid- week on upsurge of corporate and interbank forex requirements.

However, as the trading week drew to a close the unit was holding steady on lackluster demand, backed up by improved flows from portfolio investors.

Trading was in the range of 3760/3770. In interbank money market, overnight night funds were quoted at 6% while one week funds traded at an average of 9%.

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In the fixed income space, a Treasury bill auction with 175 billion on offer was held. There was a marginal drop in the yield of the 91 day to 8.478% while the 182 and 364 day yields edged up a bit to trade at 10.666% and 11.498%.

Bid to cover ratio was 2.336, significantly higher than the 182 at 1.165 and 364 at 1.593, an indication that markets have taken a view that interest rates are likely to rise in the short term and their investment preference is on the short end of the curve.

In the regional currency markets the Kenya shilling weakened due to increased end month demand from oil and merchandise importers.

Trading was in the range of 101.20/40.

In the global markets, the US Federal Reserve monetary policy stance boosted the dollar following the release of the Fed minutes that indicated the current patient approach could remain in place for some time, a further sign that policy markers see no need to change rates in either direction amid a raft of global uncertainties.

Outlook for the shilling in the coming week indicate a range bound unit with both the demand and supply side evenly matched as end month dynamics come into play.

However as these effects wear off, it is likely that shilling will trade in bearish territory.

The writer works with Alpha Capital Forex Bureau: For competitive Forex Rates VISIT Plot 12 KAMPALA ROAD-CHAM TOWERS SUITE 43: call: 0414-580619, 0392-612648

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