Uganda: Corporate and Inter-Bank Demand Keeps Shilling On Back Foot

25 August 2022
The Observer (Kampala)
By Geofrey Serugo

The Uganda shilling continued to slide opening Monday's session on the back foot at the 3,840 or 3,850 levels and due to continued corporate and inter-bank demand, the unit weakened marginally to close Tuesday's session at the Shs 3,855 or 3,865 levels, Absa bank revealed.

According to Absa, the season for end-of-month inflows has started, however, demand is still healthy and the dollar is strong globally so the shilling is likely to remain weak trading within the 3800-3900 in the short term.

"Money markets remain fairly liquid with some bouts of tightness with overnight yields between 9.00 per cent and 11.20 per cent There is no scheduled government securities auction this week." Catherine Kijjagulwe, head of trading at Absa Bank Uganda said.

Raila Odinga filed an election petition with the Supreme court on Monday and the Kenyan market awaits the verdict. Activity slowly picked up again with demand from corporates and inflows expected from the tea sector. The currency is still anticipated to trade within the 119.00-125.00 trading range in the short term.

She said the dollar remained bullish during Monday's session, maintaining its dominance against most major currencies buoyed by market expectations that the Fed will continue to hike rates aggressively to curb the rising inflation and also a rise in US Bond yields.

Concerns that Russia may halt the flow of natural gas through the Nord Stream one line continued to impact the Euro as dollar strength also impacted the currency that touched lows of $0.9928 (Shs 3,855) during Monday's trading session.

"The pound continued to weaken on Monday touching lows of $1.1744 (Shs 4,560) as markets awaited the UK Purchasing Managers Index numbers." She said.

Crude oil prices remained flat with some marginal dips as Saudi Arabia warned of a possible cut in OPEC Production against the nuclear deal with Iran. Brent Crude traded at $96.48 (Shs 374,660) a barrel and West Texas Intermediate at $90.23 (Shs 350389) a barrel.

Gold traded at $1,735 (Shs 6.7 million ) an ounce continuing to lose ground, fragile due to continued worries of a looming global recession and overall dollar strength.

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