By Stephen Kaboyo
The Uganda shilling firmed slightly, the mild recovery was supported by end month flows from non- governmental organizations.
At the end of the trading week, the shilling traded at 3695/3705 compared to 3700/3710 at opening.
In the interbank money market, overnight funds traded at 7% while one week funds quoted at an average of 10%.
In other economic news, Uganda headline inflation decreased to 2.6% in July from 3.4% the previous month, the lowest level since December 2018. The drop was mainly attributed to communication rates that had dropped considerably.
Headline inflation is a measure of the total inflation within an economy, including commodities such as food and energy prices
In the fixed income market, a Treasury bill auction with 220 billion on offer was held. Yields slightly declined on the 91 and 182 curve and a slight edge up the one year. Effective yields at weighted average prices came out at 9.629%, 10.748% and 11.502%. All tenors were grossly oversubscribed.
In the regional currency markets, the Kenya shilling weakened due to end month demand from energy and manufacturing sectors coupled with surplus liquidity in local money market.
The persistent weakness of the currency triggered the Central Bank of Kenya to sell dollars to the market.
Following the intervention, the unit recovered to trade at 103.60/80 compared to pre- intervention levels of 104.15/25.
In the international markets, the US dollar hit a two year high after the Federal Reserve cut interest rates by a quarter point. The Fed signaled that it will be data dependent and gave no clarity on future direction.
Markets were caught off-guard as they had priced in a more dovish outlook, which the Fed did not deliver. However at the close of the week the greenback lost some ground following President Trump’s comments that he would impose additional tariffs on China.
In the United Kingdom, the pound was bearish as investors factored in the growing possibility of Britain leaving the European Union without transition trade arrangements in place.
Outlook for the shilling point to range bound trading with both sides of the market expected to be in sync.
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