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Shilling Seen Weakening As Year-End Draws Near

The Uganda shilling was relatively stable all week trading within a range of 3683/3693 supported by end month flows from commodity exporters and charities.

In the local shilling market, overnight funds were quoted at 7% and one week held at previous week’s average of 10%.

In the fixed income market, a Treasury bill auction with amount of 220 billion on offer was held. Yields were generally flat at 8.679%, 10.747% and 11.531% for 91,182 and 364days respectively. All tenors registered demand over and above the offered amount.

In the regional currency markets, the Kenya shilling was stable but was expected to come under pressure on demand for energy and manufacturing. Trading was in the range of 103.45/65.

The Tanzania traded within a narrow range on tourism and agriculture flows. Markets quoted the shilling at 2292/2302.

In the global markets, the US dollar held strong as comments from Beijing sparked renewed hopes that China and US could get full – fledged negotiations back on track to resolve the protracted trade dispute. The greenback was also supported by investors end month market rebalancing needs. Meanwhile a closely watched yield curve inversion in US treasuries remained with the yield on the 10 year below that of a 2 year note, an issue that has raised concerns among investors as the phenomenon has historically preceded a recession.

In Britain, the sterling struggled as the threat of a no deal Brexit became obvious following the suspension of parliament to dodge a possible no confidence vote.

“Outlook for the shilling suggest that the currency is likely to begin a phase of weakening as importers begin placing orders for end of year stocks, a cyclical scenario typical at this time of the year,” says Stephen Kaboyo, an analyst and Managing Director at Alpha Capital Partners.

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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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