Shilling slides to record lows- inches towards the 3900 level

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The perpetual decline of the shilling continued with the unit touching record lows, inching towards the 3900 level as offshore investors dollar demand coupled by oil importers demand intensified.

The exchange rate remains a key variable in Uganda’s economy, therefore the sustained depreciation will continue to pose serious economic challenges.

In most emerging economies, markets made cautious gains as investors mulled over a possible slowdown in the pace of US Federal Reserve rate hike.

In the global markets, the US Federal Reserve jacked up its benchmark rate by three quarter of a percentage point in an effort to cool the most intense inflation since 1980’s.The Fed flagging weakening data so far, with US GDP shrinking, vowed not to surrender in the fight against inflation.

Looking ahead, depreciation pressure on the shilling along with other emerging market currencies is expected to continue underpinned by the Federal Reserve aggressive stance.

The interest rate hike in the US increases the relative returns on dollar investments as a result Uganda is likely see more foreign investment outflows and as a consequence, higher cost of capital and re- pricing of risk in the short term.