Shilling strengthens against the dollar in early June 2016

Uganda's consumer price index (CPI) statistics state that inflation increased to 5.4% in May up from 5.1% that was recorded in the month of April 2016.

 This was attributed to the increase in annual core inflation and a rise in annual services such as healthcare, education, insurance, financial and legal services.

The annual core inflation which excludes food, fuel, electricity and metered water prices which are volatile to price changes increased from 6.4% to 7.0%.

 In preparation for the release of the National Budget figures for the financial year (FY) 2015/2016, it is important to note how the economy is fairing.

 Steven Kaboyo of Alpha Capital Markets said the shilling revolved within a range, weakening as demand surged on account of interbank buying and importers forex needs. In the money market, overnight and one week funds traded at an average of 12% and 16% respectively.

In the international currency markets, the dollar dropped to a two week low as investors locked in gains on the greenback's recent ascent.

 "In the coming days, the shilling is seen marginally weakening as the market anticipates renewed demand from market players during the budget week," Kaboyo said.

By Monday morning, Bank of Uganda quoted the shilling at 3364/3374 buying and selling respectively.

 He added that Markets are likely to remain on the edge as they await policy pronouncements that will guide the general direction of the economy going forward.