The Uganda shilling seemed to be halting the downward trend against the dollar at the close of the week, at 3,695.05 buying and 3705.05 selling, on Friday, according to the Central Bank.
The shilling has been depreciating since December 19, 2024, when the dollar was quoted by the Bank of Uganda at 3,633.55 buying and 3,645.55 selling till mid this week when it hit 3,707 selling.
The shilling’s gains were partly attributed to diaspora remittances and reduced demand for the greenback over the festive season.
At commercial banks, the shilling opened the week trading at levels of 3,680/3,690 in a market dominated by dollar demand that led to a low 3,707/3,717 level.
Trading experts said the demand was mainly coming from the energy sector at the start of the week and then manufacturing for the rest of the week as diaspora remittances weakened.
“There was limited dollar supply from remittances and agri-commodities though this was overshadowed by demand,” said Rahmah Masagazi, Head of Sales – Global Markets Absa Bank Uganda.
With the resumption of business from the end-year holiday break for most of the corporate sector, some pressure on the shilling is anticipated, to push trading levels to 3,675 – 3,730 in the short term, according to Masagazi.
Meanwhile, the Bank of Uganda was in the market during the week with a Treasury Bond auction.
The two-year, five-year and 15-year bonds emerged higher at 16.0 percent,16.75, and 17.5 respectively, up from 15.75 percent for two-year bonds, 16.0 for five-year and 16.75 for the 15-year bond.
A total of 791.17 billion shillings was accepted which was 80 percent of the amount offered in the auction.
On the international scene, the Euro/Dollar remained stable at 1.03 dollars on Friday for the third consecutive day.
However, for the fourth consecutive month, the Euro remains under pressure and could depreciate further against the dollar.
The impending swearing-in of US President-elect Donald Trump and his economic and political pronouncements are coupled with geopolitical risks and differences in interest rates in favour of the U.S. dollar, to give a boost to the US dollar.
This will most likely have spillover effects on other countries in direct trade with the US, and in the longer term, developing countries like Uganda.
If Trump confirms his stance on the imposition of new tariffs on imports, there is a risk of new inflationary pressures in the US economy which is likely to create new data points regarding prospects of further reductions in key interest rates by the US Central Bank (the Federal Reserve).
The pound was the weakest performer among developed market currencies, losing 0.97 percent in the week leading to January 10th to levels of about 1.2239 dollars, the weakest since November 2023.
This was driven by concerns about the UK government’s ability to control the deficit and rising borrowing costs.
There is also fear the that escalation of sanctions against Russia and Iran, is responsible for the pressure on crude oil prices and this could have effects on net oil importers like Uganda.
This is also being abetted by higher demand in winter-hit regions.
“Stricter sanctions on Russian and Iranian crude have prompted Chinese and Indian refiners to increase crude purchases from the Middle East and other regions due to concerns about restricted access to supplies,” says Masagazi.
Oil prices generally rose to a three-month high due to a contraction in US stock crude supplies. Brent was trading around 78 dollars a barrel, already up more than 5 percent this month.
The Uganda-Kenya shilling market remained stable with the Kenya currency trading at 28.55.
-URN
