Shilling sheds 0.3% after sh180b auction

Jan 28, 2015

Despite an injection of sh180b to ease scarcity, the shilling lost 0.3% against the dollar on Wednesday with some traders saying yields on the recent 2 year and 10 year Treasury bond could signal lower yields going into February

By Samuel Sanya & Jacky Achan

Despite an injection of sh180b to ease scarcity, the shilling lost 0.3% against the dollar on Wednesday with some traders saying yields on the recent 2 year and 10 year Treasury bond could signal lower yields going into February.
 
 
The shilling was trading at 2,857/2,867 buying and selling respectively at the close of business on Wednesday at most commercial banks down from 2, 849/2,859 on Tuesday.
 
"There is considerable demand from importers, manufacturers, commercial banks and the business community. The 10 year bond had little effect on the forex movements as it is long term," Daniel Sage Muganza, a forex trader with Centenary Bank.
 
"I personally think offshore interest was low for this issue. The interest of 11% is much lower than the Bank of Uganda window rate of 15%. We could see yields starting to drop,
 
"Most commercial banks are square right now but we could see some movements starting tomorrow, he explained. 
 
The shilling has been scarce in the interbank market due to mid-month tax payments, the recent central bank intervention eased pressures.
 
Muganza noted that most commercial banks are now square after taking long positions before the central bank re-opened a 2 year bond and sold a 10 year bond on Wednesday.
 
The shilling has lost about 3% against the dollar this month, partly due to dollar demand from commercial banks who were stocking up due to fears of interest hikes in the US.
 
Muganza noted that the Central Bank was on the market last week. They spent nearly 30 minutes injected $140m on the selling side. It had sold $80m more the week before to shore up the shilling.
 
Ahmed Kalule, trader at Bank of Africa told Reuters that tight shilling liquidity in recent trading sessions had pushed up rates for overnight and one-week funds in the interbank market.
 
James Mutuku, the Standard Chartered Bank Head of financial markets says the shilling has stabilized after numerous Central Bank interventions.
 
He said: "The shilling gained by 35-40 last week as a result of Bank of Uganda's intervention. There are (dollar) inflows coming in especially from the manufacturing sector."
 
Unlike earlier reports of limited off shore interest, Mutuku says there is still sizeable offshore interest in Uganda's treasuries. He says this will tame dollar demand and slow the shilling's depreciation momentum.
 
 

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