Shilling recoups amidst uncertainty

THE shilling saw huge swings in interbank trading dur­ing last week, following the monetary policy committee’s decision to cut the Central Bank Rate (CBR) by 100 basis points to 21%.

The shilling traded a wide range of 2,400 – 2,620, with extreme volatility been experienced in some session where moves upward of 5% were seen.

“The rate cut reinforced the view that yields in government debt would fall further, thereby further reducing uptake by foreign firms, especially in light of higher yields in other African markets like Kenya and Nigeria,” Dickson Mage­cha, the Standard Chartered Bank forex trader, said in a weekly note.

“Selling by the Bank of Uganda helped to cool of market jitters with the shilling gaining back some of the losses to close the week at 2,440-2,450,” he stated.

Going forward, he predicted: “We expect the unit to remain under pressure as falling inter­est rates keep offshore inves­tors off the local debt market, while increasing corporate demand coupled with the ap­proaching dividend payment season adding more pressure to the unit.”

The shilling had fallen to 2,610 on March 1.