The Uganda shilling strengthened against a backdrop of strong inflows from commodity exporters and portfolio flows targeting the fixed income investments during the week ending 21st June 2019.
Trading was in the range of 3690/3700 compared to Monday opening levels of 3715/3725.
In the money market, overnight funds were priced at an average of 6% while one week funds were priced at 9%.
In the fixed income market, a Treasury bill auction with 175 billion on offer was held. The Yield on the 91 day was flat at 9.19% while there was a marginal decline on the 182 and 364 day tenors coming out at 10.52% and 11.40% respectively. Some outlier bids were rejected on the 91 day tenor, out of the 10 billion on offer; bids totaling 8.4 billion were accepted.
In the regional currency markets, the Kenya shilling firmed up on the back of inflows from horticulture exports and nongovernmental organizations.. The shilling sentiment was also boosted by Governor Njoroge’s comments that the Central Bank had a solid war chest to manage the volatility of the currency going forward.
In the international currency markets, the US dollar lost ground after the Federal Reserve left the policy rate unchanged. However the Fed left the door open for rates cuts. Traders have priced in easier monetary policy as soon as July but also betting on rate cuts coming in September and December. Additional pressure on the greenback came after the benchmark 10 year yield fell to the lowest in two years.
“Forecast for the shilling indicate a stable unit as end month conversions trickle in and the market remains long on dollars,” says Stephen Kaboyo, an analyst and Managing Director at Alpha Capital Partners.