The Uganda shilling held its ground on account of sagging demand as interbank market players unwound positions. Trading was in the range of 3675/3685.
In the shilling interbank market, overnight funds quoted at 7% while one week funds traded at the previous level of 10%.
In the fixed income market, the 2 and 5 year bonds yield to maturity prices came out at 13% and 15.1% respectively with significant uptake that resulted in oversubscription.
In the regional currency markets, the Kenya shilling weakened and was seen softening further due to surging dollar demand from the energy and manufacturing sector coupled with excess liquidity in the market despite the Central Bank’s effort to mop up. Trading was in the range of 103.80/104.00.
In the global markets, the US dollar hit its highest level since May 2017. The aggressive easing of the major economies sent investors into the reserve currency. The upbeat US economic data, which was a strong indication that it was not all doom and gloom for the US economy also gave the dollar an edge.
In the UK the pound fell close to a 3year low as turmoil and confusion on Brexit continued in British parliament.
“Outlook for the shilling suggest sideways trading driven by matched demand and supply in the market. In the very short term, no major event is expected to move the currency, however in the medium to long term, the news with respect to oil sector developments have created a negative sentiment on the shilling, with hopes of strong inflows alongside the final investment decision being squashed,” says Stephen Kaboyo, an analyst and Managing Director at Alpha Capital Partners.
It is worth noting that work on a pipeline that would transport crude oil 1,445 km (898 miles) from Uganda to Tanzania’s coast has been suspended.
Tullow Oil had planned to sell a stake in the $3.5bn (£2.8bn) project to state-owned Chinese firm CNOOC and French oil giant Total, but the deal collapsed last week after the companies failed to secure an agreement on tax relief from Uganda’s Revenue Authority.
Tullow Oil, an Irish company, discovered proven reserves of more than a billion barrels of oil around Lake Albert in 2006, but the resources have yet to be exploited.
An industry official told Reuters news agency that the collapse of the deal last week had “meant uncertainty in terms of who will meet what cost in developing the project, which is meant to have a similar shareholding structure like that of the oilfields”.
