The forex market was calm with the local unit trading flat for most of the trading sessions as market activity was at the lowest ebb.
Market players were seen on the fence as demand dipped due to the lockdown. Trading was in a narrow range, holding at 3765/3775 on the bid and ask.
In the fixed income segment, a Treasury bond auction of a 2 year and 5 year was held at fixed coupons of 11.00% and 14.00% Amount on offer was split as 75 billion and 210billion for 2 and 5 year respectively. Both tenors were oversubscribed and yields printed at 13.949% and 16.470%. BOU managed rates by cutting off outlier bids.
In the regional currency markets, the Kenya shilling was relatively stable but was seen coming under pressure due to reduced inflows from remittances and less portfolio interest. Trading was in the range of 106.00/20.
There were mixed signals in the global markets with the US dollar holding ground as news report on signs of success in a COVID 19 drug trial as well as early plans to reopen the US economy drove optimism and risk appetite.
While Wall Street tumbled on a stream of bad news about the economic damage caused by COVID 19 as data showed a historical plunge in US retail sales and a slump in factory output.
In China, the economy shrank 6.8% in the first quarter of 2020, its first reversal since 1992 as COVID paralyzed production and spending.
“Outlook indicates that the local currency is likely to be capped at the current market levels drawing support mainly from removal of excess liquidity by the Central Bank amid thin market activity. However on the global scene demand for safety will remain the key theme,” says Stephen Kaboyo, an analyst and Managing Director at Alpha Capital Partners.