Uganda Shilling weakens; to touch 3800 level

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By Stephen Kaboyo

Heightened demand kept the shilling on the back foot during the trading week. The shilling was under immense pressure breaching the key level of 3775. Demand was mostly from the interbank and importers.

In the money market overnight funds traded at an average of 6% while one week was at 9%.

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In other economic highlights, the IMF Executive Board concluded the 2019 Article IV Consultations with Uganda and confirmed that economy is on a solid growth path but pointed out concerns on the weakened debt metrics and the need to create at least 600,000 jobs a year to match population growth of 3%.

In the debt market, a Treasury bill auction with 175 billion on offer was held. Yields came out at 8.713%, 10.546% and 11.469% for 91, 182 and 364 day tenors.
The auction was oversubscribed with significant demand on the 91 day that registered a 3.184 bid to cover ratio.

In the regional markets, the Kenya shilling held steady and was expected to strengthen supported by dollar inflows from the diaspora and tight liquidity conditions in the money markets. Trading was in the range of 101.00/20.

The Tanzania shilling was equally strong trading at 2,298/2,310, lifted by flows from the mining sector.

In the global markets the US dollar weakened against other majors as investors sought out safe haven currencies fearing the US-China trade conflict will escalate following President Trump’s comments that China broke the deal.

In the coming week, the Uganda shilling is likely to weaken further with markets anticipating the unit to touch 3800 psychological level on account of the demand and supply imbalance.

read: Shilling outlook: May & June seasonality factors to exert another round of upward pressure

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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