Shilling stable, bolstered by end month conversions

The Uganda shilling was relatively stable bolstered by end month conversions amid low market demand during the week ended December 02, 2017.
On average, trading was in the range of 3620/3630.

On Monday morning, the shilling was trading at 3,627.25/3,637.25 against the dollar buying and selling respectively during the morning session; a slightly change from Friday's close of 3,627.89/ 3,637.89.

In the interbank, liquidity remained high with overnight rate dropping to 7.5% while one week traded at 9.5%.

In addition, inflation continued to ease with a key gauge of price touching the lowest in several months at 4%. This was due to a decline in the inflation of annual food crops prices.
 "The current trend strengthens the case for further monetary easing considering the gap between CBR and inflation. Core inflation, a key indicator tracked by BOU which excludes volatile components also dropped to 3.3%," Stephen Kaboyo, Financial analyst said.
 
In the fixed income market, yields on the 3 year and 5 year bonds continued on the downward trend, trading at 11.217% and 14.343% respectively.

Kaboyo projects that the shilling is likely to remain firm with a chance of a mild appreciation on the back of end of year conversions as market players enter a slowdown mode coupled with seasonal diaspora remittances.

Furthermore, in the Regional Markets, the Kenya shilling strengthened on the back of receding political risk as well as strong portfolio flows trading at 103.25/45.
On the global market, Kaboyo stated that the US dollar held steady on upbeat US economic growth data as markets remained nervous on the progress of the US tax reform legislation, while the British pound touched its highest level since September riding on the hopes that the Brexit accord could be reached by next month.