The shilling weakened marginally for most of the trading sessions during the week driven by the demand from importers mostly in energy and manufacturing sectors.

At the much-awaited Treasury bill auction, yields remained relatively stable and offshore participation was potentially lower than expected. However the trickle in led to a slight gain of the shilling in the closing session of the week with the market quotes of 2,660/2,680. In the coming days, the shilling is likely to trade range bound as the market expects end month NGO flows that normally increase supply temporarily but not substantial enough to alter the direction.

The underlying trend remains of a weaker shilling. In the regional markets, the Kenya shilling was equally under pressure touching the high of 87.70 on account of strong demand from importers against very weak supply. Market expectations point to volatility of KES in the coming weeks ahead of the March elections with spillover effects to Uganda's financial market and other regional markets.

Stephen Kaboyo is the Managing Director of Alpha Capital Partners.

The shilling edged down slightly against the dollar on Tuesday due to high demand from the energy and manufacturing sectors. It traded at 2,675/85 weaker than Monday's close 2,665/75. However the shilling recovered during the course of the week due to dollar inflows from offshores who invested in the Treasury bill auction. The local unit closed the week trading at 2,660/70.

The shilling is expected to hold stable this week trading within ranges of 2,655/90. However, offshore players may contribute to slight strengthening of the shilling as they invest in the three-year bond issue slated for January 31, 2013.

Catherine Jamwa is the Chief Manager Treasury at Centenary Bank

The shilling came under pressure early in the week trading 2,675/85 from the 2,660/70 before retracing back to close at 2,665/75. The week was marked with mild activity on both corporate and interbank fronts. Yields on treasuries were literally unchanged with the one-year paper coming in at 15.46% from 15.36% in the previous auction.

Sizeable flows were seen heading into the debt market from offshore investors and the trend might hold into next week. Cash markets continued to rely on the central bank injections.

We expect the shilling to remain range bound in the 2,660-80 next week as market receives the three-year paper to be issued on Janaury 31, 2013. We expect activity to pick up as end-of-month conversions hit market.

Standard Chartered Bank, Financial Markets Department.