The local currency traded with a mild bullish bias, gaining slightly on heightened interbank and corporate activity that saw the unit trading within a narrow range of 3690/3700 during the week ending December 4, 2020.
In other domestic economic news, CPI data showed a slight drop in consumer inflation in November to 3.7% in annual terms.
The modest readings put the monetary authorities in a comfortable zone.
In the fixed income market, yields on short end of the curve inched up, as markets reacted to strong signals coming from the fiscal authorities indicating the need to urgently borrow in excess of 3.5 trillion in the domestic markets, arising from the inevitable plunge in economic growth and tax revenues.
In a related development the fiscal authorities issued for the first time a 20 year bond in a private placement mode to supplement the calendar issuance.
In the regional markets, in Kenya, confusion hit the markets over the Kenya shilling exchange rate as the Central Bank official rate continued to trend way below the interbank forex rate, pointing to a risk of a market developing a dual exchange rate. The divergence has created anxiety with a net effect being low dollar liquidity in the market. Forex dealers quoted the shilling at 115, while the Central Bank rate was at 110.07.
In the global markets, the US slid to a 2 and half year low against other major currencies as investors wagered that more economic stimulus from Washington and the expected start of Covid 19 vaccinations would support riskier assets.
“Outlook for the home unit suggests range bound trading as December dynamics of increased remittances and end of year business slow down begin to take effect,” says Stephen Kaboyo, an analyst and Managing Director at Alpha Capital Partners.