Experts predict tough month for shilling

Feb 01, 2016

The Uganda shilling has declined in value against the dollar by 21% since January 2015 on the back of a strong dollar as the US economy improves.

The shilling continued to slide against the dollar last week, trading inside the range of 3450-3490. The market witnessed increased buying pressure as the month came to a close.

The Uganda shilling has declined in value against the dollar by 21% since January 2015 on the back of a strong dollar as the US economy improves. Offshore investors have moved their dollar investments back to the US to enjoy improving treasury rates.

At the same time, international prices for coffee and tea, Uganda's largest commodity exports have been declining, placing more pressure on the shilling as export revenues continue to fall behind import expenditure.

In the Bond Market, BOU accepted UGX 195.6 billion in 2&5 year bonds, a little above the amount offered. Weighted average yields came out at 23.59%and 21.20% respectively.

In the international markets, the US Federal Reserve kept interest rates unchanged and indicated that it was closely monitoring global economic developments. The decision was widely expected by the markets.

"Forecast for the shilling as we enter the election month point to rising demand linked to election anxiety. Looking beyond, the shilling trend will be largely influenced by a myriad of structural imbalances facing the economy," Stephen Kaboyo of Alpha Capital Partners said.

 

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