Heightened demand kept the shilling on the back foot during the trading week ending 10th may 2019. The shilling was under immense pressure breaching the key level of 3775. Demand was mostly from the interbank and importers. In the money market, overnight funds traded at an average of 6% while one week was at 9%.
In other economic highlights, the IMF Executive Board concluded the 2019 Article IV Consultations with Uganda and confirmed that economy is on a solid growth path but pointed out concerns on the weakened debt metrics and the need to create at least 600,000 jobs a year to match population growth of 3%.
In the debt market, a Treasury bill auction with 175 billion on offer was held. Yields came out at 8.713%, 10.546% and 11.469% for 91, 182 and 364 day tenors. The auction was oversubscribed with significant demand on the 91 day that registered a 3.184 bid to cover ratio.
In the regional markets, the Kenya shilling held steady and was expected to strengthen supported by dollar inflows from the Diaspora and tight liquidity conditions in the money markets. Trading was in the range of 101.00/20. The Tanzania shilling was equally strong trading at 2298/2310, lifted by flows from the mining sector.
In other markets the South African rand was stable in an election week as it became clear the ANC was on course to retain power. However at close of the trading week, the risk selling in the global markets fueled by the US- China trade tensions dented the rand.
In the global markets the US dollar weakened against other majors as investors sought out safe haven currencies fearing the US-China trade conflict will escalate following President Trump’s comments that China broke the deal.
“In the coming week, the Uganda shilling is likely to weaken further with markets anticipating the unit to touch 3800 psychological level on account of the demand and supply imbalance,” says Stephen Kaboyo, analyst and Managing Director at Alpha Capital Partners.
