Uganda Shilling depreciates against the US Dollar

The Uganda Shilling opened trading of the week ended March 22, 2019, holding steady with demand and supply evenly matched but came under slight pressure mid-week as import demand rebounded. 

Trading was in the range of 3700/3701. In the interbank money market, overnight funds traded at 7% while one week traded at 10%. 

By the close of the business session on Tuesday, the Shilling was trading at 3705.67/3715.67. This means the local unit has slowly depreciated by an average of sh4 against the dollar.

However, the opening session was recorded at 3,701.5/ 3,711.5 buying and selling respectively according to the Bank of Uganda (BOU).

Traders attribute the depreciation to reduced dollar inflows. According to BOU, limited exports have always been held responsible for the depreciation of the Shilling.

Stephen Kaboyo of Alpha Capital Markets said the local unit is likely to maintain the current levels as demand and supply continue being the major driver on the currency pair.

"As the market enters the end month cycle, the US Dollar conversions are expected to boost supply," Kaboyo said.

In the regional markets, the Kenya Shilling, strengthened on offshore flows targeting the government securities market but was expected to lose momentum as import demand build up. Trading was in the range of 100.65/85. 

The Alpha Capital Market report indicates that in the global markets, the US Dollar eased against the major currencies, falling to a more than six week low after the Federal Reserve indicated that it had abandoned plans to raise interest rates for the rest of 2019. 

In the UK, the Pound Sterling gained slightly on the news that Prime Minister Theresa May had pulled off a deal to give more time to resolve when and how Britain will exit from the EU.