Shilling stable against dollar

CURRENCY        ECONOMY

The Uganda shilling strengthened, establishing a new support level of 3650, market activity underpinned by low appetite for forex from commercial banks and importers during the week ended 13 September 2019.

A report by Capital Alpha Partners indicated that the unit was also supported by inflows from offshore investors' participation in the Treasury bill auction, trading was in the range of 3657/3667. In the interbank money market, overnight funds quoted at 7% while one week averaged 10%.

In the regional currency markets, the Kenya shilling gained ground, on account of tightening liquidity conditions in the local money market and reduced dollar demand. Trading was in the range of 103.55/75.

In the global markets, the report further indicated that the dollar held firm against the major currencies as markets focused on the Federal Reserve likely action at its upcoming meeting where it is widely expected that it would cut rates.

Relatedly, President Trump took aim at the Fed, in a tweet stating that the European Central Bank (ECB) is succeeding in depreciating the Euro against the dollar hurting US exports while the Fed only sits. Also in support of the greenback was the scaled back pessimism about the US-China talks, with growing chances of an interim trade pact coming soon than later.

In the UK, the pound gained 0.3% on the dollar after the British parliament moved to block a no-deal exit from EU. However, the sterling remained vulnerable over the uncertainty on the terms of exit.

In the Eurozone, the Euro dropped 0.75% after ECB cut its main deposit rate by 10 basis points to -0.5%, a record low, but in line with market expectations. The ECB also re-launched a quantitative easing program to boost the regional economy.

The report further projected that the Uganda shilling to trade in a stable range as mid-month corporate tax payments limit the demand for dollars.

By the close of business on Monday, September 16, 2019, commercial banks quoted the unit trading at 3,666.96/3,676.08, unchanged from the afternoon trading session buying and selling respectively against the dollar.

Tom Kagiri, a trader downtown attributed the shilling stability to traded demand and supply conditions that remained even.