Thursday, October 22, 2020
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CURRENCY WATCH: Shilling Trades Stable Supported By Commodity Exports

The Uganda Shilling remained stable for most of the trading session, opening the week in the range of 3788/98 and closing at 3785/95 during the week ending May22, 2020.

The local currency was supported by hard currency flows from the treasury auction and commodity exports amid depressed importer demand for forex.

In the fixed income segment, the market continued its appeal, attracting huge uptake from an investor base that was largely domestic and some trickle in from offshore. Yields dropped slightly as compared to the previous treasury auction, printing at 8.604%,10.711% and 12.267%. Amount on offer was 140 billion, with tendered amount in excess of 324 billion.

REGIONAL MARKETS

Kenya shilling firmed on account of tight liquidity conditions in the money market as investors keep an eye on disbursements from donors that was expected to improve supply of forex. Trading was in the range of 106.75/95. While in South Africa, the rand edged up as global risk appetite improved hopes of an economic bounce back, though markets remained cautious ahead of the Central Bank policy pronouncement.

GLOBAL MARKETS

The US dollar traded in a narrow range against majors peers as investors weighed the impact of global economic lockdown. The dollar index which measures the greenbacks strength against six major currencies was up 0.1% at 99.27.

COMMODITIES MARKETS

Oil prices advanced as drawdown of US crude inventories and output cuts by major producers helped ease concerns about a supply glut, though lingering fears over the global economic fallout from COVID 19 capped the gains. The global bench mark crude for July delivery traded at $36.45 per barrel with markets putting the next test to upside above $40.

OUTLOOK FOR THE LOCAL CURRENCY

Stephen Kaboyo, an analyst and Managing Partner at Alpha Capital Partners says: “In the coming days, the shilling is likely to trade with a firmer tone, cushioned by scanty end month flows against decline in import demand. However a bit of optimism about easing lockdown restrictions might spur isolated pockets of demand but technically the local currency will remain in oversold territory.”

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Taddewo William Senyonyi
https://www.facebook.com/senyonyi.taddewo
William is a seasoned business and finance journalist. He is also an agripreneur and a coffee enthusiast.

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