The Uganda shilling was on the back foot as demand mostly from merchandise importers surged midweek and drove the local unit to test record lows of 3730/50 during the week ending October 30, 2020.
In the fixed income market segment, yields on government bonds edged higher on both 2 year and 10 year, printing at 14.55% and 16.00% as the markets tried to get to grips with increased government borrowing following the announcement that government expects to borrow at least 4 trillion shillings from the domestic banking system.
In the regional currencies, the Kenya shilling came under pressure on increased import demand against very limited inflows. The unit traded at 108.65/85. While in Tanzania, the currency was stable as focus was mostly on the elections, with dollar supply remaining sufficient mainly from cashew nut exports. Trading was in range of 2313/23 unchanged from the previous week’s levels.
In the global markets, the dollar paused its climb, while the euro wallowed near a 4 week low against the greenback after ECB signaled further monetary easing by end of year. Still in the US , stocks were subdued after Wall Street sell off as Corona cases continued to surge ahead of the Nov 3 elections.
“Outlook for the shilling indicates that the unit will remain under pressure undercut by seasonal surge in demand from mainly merchandise importers closing out end of year orders,” says Stephen Kaboyo, an analyst and Managing Director at Alpha Capital Partners.