Shilling to come under pressure next week

The Uganda shilling underwent some slight volatility as dollar supply dwindled and demand picked up mainly from the manufacturing and energy sectors. Trading was in the range 3380/3390 in the business week that ended on September 9, 2016.

In the government securities market, Bank of Uganda held a Treasury bond auction for 3 year and 10 year. The market appetite was significant pushing yields lower and giving BOU an opportunity to sell above the 160billion that was on offer. Coupon rates were 16.375% and 16.641% while the weighted average yields were 16.447% and 16.644% respectively.

In international currency markets, the US dollar was on soft ground due to the continuing uncertainty about the US monetary policy. The markets were putting a 50 percent chance for a hike at the Fed's 20th-21st September meeting and 80 percent odds by the December meeting.

Stephen Kaboyo, CEO of Alpha Capital Partners noted that the outlook for the shilling indicates slight pressure building up next week as demand improves  and amidst growing expectations that interest rates are likely to go up in the US, which is likely to reduce demand for frontier markets assets and increase pressure on  currencies.