Shilling trades in a volatile mode amidst local and offshore selling; Outlook indicate volatility play

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By Stephen Kaboyo

The Uganda shilling traded in a volatile mode amidst local and offshore selling. Broadly the unit bounced back sharply to trade in the range of 3760/3770. Liquidity in the money markets remained tight. Overnight funds traded at 6 percent while one week funds traded at 9 percent.

In the fixed income market, Ugx. 220 billion was on offer for 3 and 10 year bonds. Yields went up to 16.500% and 17.250% respectively. Both tenors were oversubscribed. Bank of Uganda rejected speculative bids on the 10 year bond.

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In the regional markets, the Kenya shilling held firm against the dollar backed up by sizable portfolio flows targeting the equity and bond markets. Trading was in the range of 100.65/85

In international currency markets the US dollar erased it’s losses and ended higher against the majority of it’s peers as investors shrugged off news that US may impose more tariffs on Chinese imports. The greenback was also supported by the rising US Treasury yields, and the inflation data that reaffirmed expectations that the Federal Reserve will hike interest rates two more times this year.

Outlook indicate some volatility play, with the shilling likely to build on the bullish momentum in dull trade as corporates stay out market on account mid-month taxes.

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