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Shilling Stable On Increased Dollar Inflows

The Uganda Shilling was stable cushioned by dollars inflows as demand remained muted on corporate mid- month tax payments. 

Trading was in the range of 3765/3775 during the week ending May17, 2019.

In the money market, overnight funds were priced at an average of 6% while one week was at 9%.

In the fixed income market, Treasury bond auction for a 2 and 5 year bonds was held. Shs 210 billion was mopped up. Yields came out at 12.85% and 15.00% respectively. Both tenors were oversubscribed with bid to cover ratios of 2.425 and 1.730.

In the regional currency markets, the Kenya shilling strengthened due to tight liquidity conditions against subdued demand. The currency was expected to gain further as the credit reserve ratio cycle for commercial banks commence. Trading was in the range of 101.00/20. In other currencies the South Africa rand strengthened on hopes of more stimulus for China’s slowing economy. Trading was at 14.32 to the USD.

In the global currencies, the US dollar was bullish holding near a two week high supported by strong US housing data and weekly jobless claims report which pointed to sustained labor market strength. The greenback also drew strength as its peers such as the euro and the pound were held down by bearish factors.

“Forecast for the shilling indicate a range bound unit as market jitters related to the fiscal budget for 2019/2020 buildup. The sensitivity to new economic measures expected to be announced in budget reading early June will keep market players with limited open positions,” says Stephen Kaboyo, an analyst and Managing Director at Alpha Capital Partners.

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