The Uganda shilling inched down undermined by dollar demand from energy and manufacturing sectors. The currency weakened to trade in the range of 3658/3665 at the end of week compared to 3638/3648 at opening.
Bank of Uganda (BoU) was in the market mopping excess liquidity. In the interbank money market, overnight funds traded at 6.50% while one week funds traded at 8:50%.
In the fixed income market, BoU held a 3 year and 10 year bond auction, both tenors were oversubscribed. Yields came out at 11.251% for 3 year and 14.379% respectively.
In the regional markets, the Kenya shilling strengthened supported by portfolio flows and positive sentiment due to adequate levels of the Central Bank Reserves that stand at 5.9 months of import cover.
In international markets, the US dollar was on the defensive after the Federal Reserve raised interest rates by 25 basis points and also raised GDP forecast in line with market expectations and signaled at least two more hikes for 2018. Markets reacted with the benchmark 10 year yield breaking above 2.9%. The greenback is likely to remain under pressure as US tariff plan ignites trade war fears with China.
“Outlook for the shilling in the coming week indicates that the currency will remain on the back foot as market demand continues to outstrip supply. Players are expected to square positions in a short trading as markets slow down for a long Easter weekend,” says Stephen Kaboyo, an analyst and Managing Director at Alpha Capital Partners.