Business
BOU intervenes as shilling hits sh4,300 on Thursday
“Given BOU’s cautious and sparing approach on using reserves, today’s action will not override the long-term fundamentals affecting the value of the shilling.”
BOU intervenes as shilling hits sh4,300 on Thursday
By: Ali Twaha, Journalist @New Vision
________________
The Uganda shilling extended its losses against the dollar during Thursday’s session, weakening from opening levels of 4220/4230 to a fresh all-time low of 4300/4310.
The depreciation was mainly attributed to sustained interbank demand for dollars against a backdrop of limited foreign currency inflows. The Bank of Uganda (BOU) sold unspecified amounts of dollars to the market to ease the pressure during the day.
“After staying on the fence for a couple of weeks, BOU has finally intervened to slow the pace of intraday shilling movement. There was a knee-jerk response, the shilling went into minimal recovery, but pressures are building up again,” Stephen Kaboyo, managing director at Alpha Capital, said.
“Given BOU’s cautious and sparing approach on using reserves, today’s action will not override the long-term fundamentals affecting the value of the shilling.”
“After staying on the fence for a couple of weeks, BOU has finally intervened to slow the pace of intraday shilling movement. There was a knee-jerk response, the shilling went into minimal recovery, but pressures are building up again,” Stephen Kaboyo, managing director at Alpha Capital, said.
“Given BOU’s cautious and sparing approach on using reserves, today’s action will not override the long-term fundamentals affecting the value of the shilling.”
The imbalance between demand and available dollar supply kept pressure firmly on the local currency throughout trading.
In the money markets, liquidity in the banking sector remained tight according to an Absa market report as the effects of the recent central bank rate hike continued to filter through the market.
Reduced shilling liquidity pushed funding costs slightly higher, with overnight and short-term interest rates averaging between 12.25% and 12.50% over the course of the session.
In the money markets, liquidity in the banking sector remained tight according to an Absa market report as the effects of the recent central bank rate hike continued to filter through the market.
Reduced shilling liquidity pushed funding costs slightly higher, with overnight and short-term interest rates averaging between 12.25% and 12.50% over the course of the session.