The Uganda shilling weakened mid-week undercut by strong demand mainly from the interbank players building positions in anticipation of corporate activity on account of dividend payments during the week ending 12th April 2019.
At the close of the week, the shilling however stabilized as some market players squared and there was a slowdown in market activity. Trading was in the range of 3740/3760.
In the interbank money market overnight funds and one week funds held at the previous week’s level of 7% and 10% respectively.
In the fixed income market, a Treasury bill auction with 170 billion was held. Yields dropped across all tenors and traded at 9.27%, 10.596% and 11.425% for 91, 182 and 364 days respectively. The auction was oversubscribed.
In the regional currency markets, the Kenya shilling weakened on importer demand and excess liquidity in the money market and was expected to lose more ground on sustained demand from importers and energy sector. Trading was in the range of 100.95/101.15.
In the global markets, the US dollar held firm after strong labor and inflation data soothed concerns about the US economy, while falling oil prices weighed on commodity linked currencies such as the Canadian and Australian dollars.
According to Stephen Kaboyo, an analyst and Managing Director at Alpha Capital Partners, “Forecast indicate a bearish shilling on the back of declining yields on government securities that is likely to discourage the interest of offshore investors that has been a strong source of forex inflows. Mid- month tax obligations and a short trading Easter week may slow down the pace but not necessarily reverse the depreciation trend.”