By Stephen Kaboyo
The Uganda shilling weakened to an all-time low on the back of strong interbank demand, energy and manufacturing sector as the Bank of Uganda continued to stay on the fence.
The Central Bank seem to have taken a view that shilling weakness is driven by strong fundamentals and therefore any intervention will have little or no impact. Trading was in the range of 3890/3900.
In the interbank money market, rates for overnight and one week funds held at the previous week’s level of 6% and 9% respectively.
In the fixed income market, treasury bills yields edged up across all tenors with 91 days up 81 basis points , 182 days up by 258 basis points and 364 day 141 basis points and traded at 10.124%, 11.686% and 14.499% . 91 day tenor was undersubscribed while the rest were oversubscribed.
In the regional currency markets, the Kenya shilling was firm backed up by inflows from portfolio investors. The fx market was evenly matched on both sides. Trading was in the 100.75/95.
In the international currency markets, the US dollar pulled back from an 11 week peak against the major currencies as investors took profits after the earlier currency rally. The markets remained sensitive to the potential for an all out trade wars, European political risks and emerging markets volatility, all seen as potent factors that are likely to contain the dollar at current levels.
In commodities market, the oil prices rose by about 1% on uncertainty over whether OPEC would agree on production increase. Brent de oil futures were at $73.78 per barrel.
Forecast for the shilling indicate further weakening as speculative trading sets in and confidence in the shilling continue to be dented. It is expected that importers will exert more pressure by front loading their foreign exchange requirements in absence of adequate supply of dollars in the market.