The Uganda shilling gained ground supported by increased inflows amid low demand as Corporates geared for mid-month tax payments during the Market week ending 14th June 2019.
The ongoing investigations on Bank of Uganda (BoU) officials over printing an extra unauthorized Shs90bn didn’t affect the local unit this week as trading range was 3740/50 compared to week opening levels of 3760/70. This is probably because the news came out on Friday.
In the interbank money market, overnight funds traded at 6% while one week traded at 9%.
In the fixed income market, 3 year and 10 year bonds were auctioned with 210 billion total amount on tap. With coupons of 11% and 14.250%, yield to maturity for the 3 year bond was 13.800% and 15.95% for the 10 year .Both tenors were oversubscribed.
In the regional currency markets, the Kenya shilling weakened on elevated demand from oil and merchandise importers but also the disorganized launch of the new series of the local currency created anxiety in the market and resulted in low trading activity.
Trading was in the range of 101.45/65. In the Tanzanian market, the shilling was seen strengthening as market players were unwinding long dollar positions. Trading was at 2,295/= per US dollar.
In the global markets, the US dollar held steady and was set to show a weekly rise as investor’s focus turned to the next Federal Reserve monetary policy meeting for cues on a possible interest rate cut in light of rising risks on trade conflicts and global growth.
“Outlook for shilling indicates a flat shilling as demand remains at a low ebb due to higher than usual end of fiscal year corporate taxes. With the budget for fiscal year 2019/20 out of the way with no major surprises, market will be keeping a watchful eye on BOU policy direction at the upcoming monetary policy meeting,” says Stephen Kaboyo, an analyst and Managing Director at Alpha Capital Partners.
