Shilling forecast: long term momentum indicator reveals high risk of further depreciation

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The Uganda shilling edged lower against the dollar as the market remained pressured by mainly offshore demand and pockets of demand from energy and manufacturing sectors. Trading held in the range of 3760/70.
In the regional currencies, the Kenya shilling eased and hit fresh lows to trade at 117:60/80 as investors remained nervous of a parallel forex market amid dollar shortages.

In other notable news, The Central Bank directive on Cash Reserve Ratio and Net open position for commercial banks and its eventual reversal created mixed signals in the market.

In the local debt market, yields at the short end climbed mirroring other peer markets as investors continued to assess growth and inflation fears. The upward movement of yields will likely persist as offshore players pull back on account of rising interest rates in the US and Europe.
Yields printed at 8.002%, 8.805% and 10.999% for 91, 182 and 364 day tenors.

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In the global markets, the US dollar wobbled against its peers , on course for its first decline in months as investors assessed the path of the Federal Reserve policy and whether the aggressive hikes would trigger a recession.

Going forward, the shilling will continue to exhibit bearish signs as the long term momentum indicator reveals high risk of further depreciation.

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