By Stephen Kaboyo
The Uganda shilling gained significant ground on account of offshore inflows coupled with interbank unwinding long dollar positions.
The latest shilling rally came amidst Central Bank monetary policy tightening on worries over growing inflationary pressures.
Trading was in the range 0f 3770/3780. In the interbank shilling market, overnight funds traded at 5% while one week traded at 8.5%.
In the fixed income market, a two year and five- year bond auction was held with 130 billion on offer. Yields came at 15.55% and 16.9% . Both tenors were oversubscribed with bid to cover ratios of 2.51 and 2.27.
In the regional currency markets, the Kenya shilling held steady against the dollar supported by strong inflows from tourism and horticulture exports against thin importer demand . Trading was in the range of 100.90/101.00.
In the international currency markets, the US dollar held near a six week high as a jump in US treasury yields prompted investors to buy the greenback ahead of the monthly jobs report that was likely to support the view that US economy was in strong shape.
Outlook for the coming week suggest that the shilling will remain bullish riding on the Central Bank hawkish tone in its recent policy direction.
A short trading week with the independence holiday will also keep the market calm. However in the medium term downside risks to the currency remain largely on account of global economic dynamics coupled with Uganda’s large trade deficit.