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Wednesday,August 12,2020 10:28 AM

Uganda shilling strengthens, hits sh3700

By Samuel Sanya

Added 7th July 2020 04:49 PM

Money markets remain liquid with overnight ranges within 6.00% - 7.15%. Bank of Uganda is slated to hold a sh370b 3-year and 15-year bond auction this Wednesday, July 8, 2020 - the first in the new financial year.

Uganda shilling strengthens, hits sh3700

Money markets remain liquid with overnight ranges within 6.00% - 7.15%. Bank of Uganda is slated to hold a sh370b 3-year and 15-year bond auction this Wednesday, July 8, 2020 - the first in the new financial year.

UGANDA SHILLING
The shilling maintained its strength against the dollar, opening the week at Friday's closing level of sh3,715 buying and sh3,725 selling, an Absa report indicates.
 
Catherine Kijjaggulwe, Absa's head of trading said that limited corporate demand for dollars is balanced by the dollar supply from non-governmental organisations (NGOs) and offshore sellers targeting the bond auction this Wednesday and commodity exporters.
 
"This week, the shilling is likely to remain range-bound within the sh3700 - sh3740 levels as clients plan for the second half of the year," she said. "With financial year tax payments out of the way, a breach below sh3700 is likely if demand does not come through strongly in the next few weeks," she pointed out.
 
Money markets remain liquid with overnight ranges within 6.00% - 7.15%. Bank of Uganda is slated to hold a sh370b 3-year and 15-year bond auction this Wednesday, July 8, 2020 - the first in the new financial year.
 
Expectation is for a well-subscribed auction given the liquidity in the market and we still expect offshore appetite in the longer-dated 15-year bond that is attractive with withholding tax at 10%.
 
The Kenya shilling opened the week at 106.50/60 and continues to buoy within the 106.00 - 107.00 range with some demand but also Central Bank of Kenya interventions at levels close to 107. It is likely to remain within the same range this week.
 
The dollar traded weaker on Monday as positive US Non-Manufacturing Purchasing Managers' Index data gave market participants hope about a quicker economic recovery, boding well for the rest of the market but not so much for the dollar.
 
There was an improvement on the Euro during the week's opening session, trading stronger against the dollar and finally breaking through the $1.1300 resistance level. The Euro traded a high $1.1343 to end the day at $1.1309.
 
The pound was little moved from the week's opening levels, trading flat intraday as market participants still straddle the fence awaiting a conclusion on pending post-Brexit negotiations. The pound managed to trade a high $1.2515 to end the session at $1.2493.
 
Kijjaggulwe pointed out that there is general optimism surrounding global economic recovery, but from a longer-term perspective, it appears the risks of growth contraction, increasing debt burden and potential risk downgrades may outweigh the positives.

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