Shilling to strengthen as commodities inflows continue

The Uganda shilling maintained a firm stance during the week, trading in the range of 3595/3605 supported by improved inflows mainly from commodities. Demand remained low. 

A report by Alpha Capital Partners Stephen Kaboyo shows that there was sufficient liquidity in the interbank money market as rates remained stable with overnight funds trading at an average of 7% while 1 week money traded at 10%. 

In the fixed income market, Bank of Uganda reopened the 5 year and 15 year bonds, with 200 billion on offer. Yields came out at 13.32% and 15.07% respectively. The auctions for both were oversubscribed. 

In the regional currency markets, the Kenyan shilling proved resilient trading at 103.10, following the Supreme Court decision of the previous week. Commercial Banks were seen unwinding long dollar positions a sign that market anxiety was no longer a factor. 

In the international currency markets, the US dollar gained ground supported by the surprise deal of extending the debt limit, however undertones on the geopolitical tensions kept the dollar on the edge. 

"Forecasts indicate that shilling will continue trading within the current range, with a marginal chance of strengthening on account of buoyant inflows," Kaboyo said.