Larger than usual remittances shore up shilling

The Uganda shilling held steady with a bias towards mild appreciation on matched demand and supply amid tight liquidity conditions, Alpha Capital Partners boss Stephen Kaboyo said in a report.

In the interbank shilling market, overnight funds traded at 6% while one week funds traded  at 9%. 

The shilling trading range was in the range of 3720/30. Uganda received $1.2b (about sh4.5trillion) in 2017 in remittances, accounting for 5% of the country's Gross Domestic Product (GDP), according to a report by World Remit.

The report noted that remittances are likely to increase by 4.1% in 2018, improving the country's economy.

In fixed income market, there was no primary auction. Trading was confined only in the secondary market.

In the region, the Kenya shilling, the currency of Uganda's key trading partner held its ground supported by strong inflows from diaspora remittances. Trading was in the range 102.50/70.

In the International currency markets, the US dollar edged higher before a widely expected US interest rate hike but its gains were limited by growing expectations that the Federal Reserve may express a more cautious view on future rate rises.

While the pound sterling rebounded from a 20 month low as markets remained optimistic that the UK Prime Minister would survive a no confidence vote on her leadership and salvage a deal for Britain to exit EU.

"Forecast for the shilling indicate range bound trading as the market players square positions ahead of the festive season coupled with  larger than usual diaspora remittances," Kaboyo said.