Shilling forecast: markets to remain calm as businesses shut down for the festive season

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By Stephen Kaboyo

The Uganda shilling strengthened on back of strong inflows mainly from diaspora remittances ahead of the holiday season as the Central Bank intensified its mop up operations.



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Trading was in the range of 3659/3669. In the money market, overnight funds traded at 6% while one week quoted at 9%.
In the fixed income market segment, Treasury bill yields edged up on the 6 month and 1 year curve to trade at 11.410% and 12.952%, while at the short end, the yield remained flat at 9.499% as demand turned out to be low.



In the regional currency markets, the Kenya shilling strengthened on account of increased inflows from diaspora remittances ahead of the holiday break amid tight money market liquidity conditions. Trading range was 100.65/85.

In the global markets, the US dollar found broad support from solid economic data from the housing and manufacturing sector halting a two week decline as political developments relating to the impeachment proceedings of the US President kept the markets nervous.



The strengthening of the greenback was seen lessening the expectation of the Fed interest rate cutting cycle in early 2020.
In Britain, the pound had its worst week in more than two years hobbled by fears of a chaotic exit from EU.
Forecast for the shilling indicate a stable unit with markets expected to remain calm amid thin trade volumes as businesses shut down for the festive season. The trend is likely to hold till markets fully open, early 2020.



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