The Uganda shilling oscillated in a narrow range of 3540/50 mainly on interbank and corporate market activity.
Commercials banks were seen covering positions. The unit was a touch weaker after attempting to break beneath a key level of technical support around 3500 over the past couple of weeks.
On further analysis of the market import demand remained subdued as a result of shutdown of Kikuubo, the major business hub in Kampala.
On the economic front, concerns over the effects of the lockdown on reduction in production, restriction on non-essential business operations and reduced household demand of goods and services are beginning to manifest.
It is expected that the combined direct effects of these will have a knock on effects that will spread through the entire economy in the coming months.
In the regional markets, the Kenya shilling was steady in quiet trade as muted dollar demand from importers continued to underpin the currency. Trading was in the range of 107.70/90.
In the international markets, the US dollar held near multi month highs as investors warily awaited US inflation data. On the monetary policy front, the rhetoric from the Fed Chairman Powell seems to have calmed nerves in the bond and stock markets about US interest rate hikes. While in the UK, the pound nursed losses after Bank of England policy makers leaned away from flagging rate rises.
Forecast suggest, the fresh lockdown could trigger further mild currency sell off. However on the general market outlook, as the end of the financial year gets closer, scant appetite for forex is expected as most corporate players will be focusing on end of year tax payments.
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