Shilling to hold at the current levels as market activity slows down

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By Stephen Kaboyo

The Uganda shilling traded stable in the first half of the trading week and then broke out of the short term trading range on account of a pick in demand mainly from importers as the market remained relatively short on dollars.

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At the close of the week trading was in the range of 3690/3700 compared to opening levels of 3680/90.

In the interbank money market, overnight funds priced at 7% while one week funds at 10%.

In the fixed income market, a 5 year and 15 year bonds were issued with amounts of 130 billion and 140 billion respectively.

The 5 year with a coupon of 14%, the yield to maturity at cut-off price was 15.050%. The total bids amounted to 119 billion, registering an undersubscription.

The 15 year bond with a coupon of 14.25%, its yield to maturity was 14.350% and the total bids accepted were over the offered amount by 9billion.

In the regional currency markets, both the Kenya and the Tanzanian shilling came under pressure due to increased dollar demand from oil sector and merchandise importers.

The Kenyan money market was awash with liquidity which exacerbated the currency weakness. KES was quoted at 102.85/103.05 while TZS quoted at 2294/2304.

In the international currency markets, the USD dollar was steady and continued to gain traction against the major currencies after stronger than expected US inflation data tempered the prospect of an aggressive Federal Reserve interest rate cut at its upcoming meeting of July 30-31st .

Markets are fully priced for a quarter percentage point as US policy markers seek to support the slowing economy.

Outlook for the shilling is likely to hold at the current levels as FX market activity slows down on mid -month tax payments that are expected to be larger than usual in the first month of the new fiscal year.

read: Shilling trades flat, finds a comfort level with no demand pressures expected

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

read: Uganda’s B+ credit rating with a stable outlook is a stamp of approval in the policies driving the economy- Stephen Kaboyo

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