10 February 2013

Uganda: Shilling Continues Gradual Gain

The shilling gained marginally against the dollar last week on the back of dollar inflows from offshore investors targeting Government securities coupled with commercial banks unwinding their long dollar positions.

There was also muted dollar demand from the corporate sector during the week. The Central bank's decision on Monday to maintain its key lending rate at 12% for the second straight month, which was in line with market expectations, was seen holding yields broadly steady thus attracting a sizeable amount of foreign currency from offshore investors.

Consequently, at close of business on Friday commercial banks quoted the shilling at 2648/58 per dollar stronger than last Friday's close of 2660/70 levels.

We expect the shilling to oscillate in a narrow range of 2640/60 levels in the coming days but if corporate dollar demand comes through, we may see it trading at 2650/80 levels.

Catherine Jamwa is the Chief Manager Treasury, Centenary Bank

During the week, the shilling oscillated between a relatively narrow range, trading at the levels of 2645/2660.

There were significant inflows in the interbank market attributed to offshore players. These flows kept the shilling firm and triggered Central Bank action on the buy side.

This week, it is expected that neither the bears nor the bulls will take full control of the market. The market is expected to remain relatively stable trading at levels of 2640/2660.

Stephen Kaboyo is the Managing Director of Alpha Capital Partners

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