Exchange rates: Shilling sustains depreciation pressure

The Uganda Shilling depreciated to a three month low as demand surged mainly from energy and manufacturing sectors and the interbank during the week ending October 7, 2016.

The shilling breached a key resistance level of 3400 and traded in range of 3405/3415 by Friday morning compared to 3403/3413 buying and selling that was recorded at the closure of business on Thursday.

In the government securities market, Bank of Uganda (BOU) offered Sh160billion in 2 and 15 year bonds.  The market was oversubscribed with yields dropping across all the tenors.

"In the international markets, the US dollar traded strong against all the major currencies, drawing it's bullish stance on the upbeat US manufacturing survey report," Stephen Kaboyo, the  Alpha Capital Markets boss said.

He noted that the British pound was bearish as concerns over Brexit remained on the cards coupled by the strength of the dollar on the expectation of US interest rate hike.

Kaboyo added: "Outlook for the shilling indicates sustained depreciation pressure as demand side market activity remains high amid low foreign exchange inflows.

He further added that panic buying is likely to set in, as the currency tests new resistance levels.

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