The Uganda shilling hit a bit of volatility, trading sideways as pockets of demand emerged amid low foreign exchange supply during the week, Stephen Kaboyo from Alpha Capital Markets said.
The unit traded above the support level of 3700 for most sessions of the week. In the interbank money market, there was sufficient liquidity with overnight rate holding at 6% while one week remained at the previous week's 9%.
The fixed income market had bond reopening in tenors of 2 and 10 year with present coupons of 11.00% and 14.250%. The total amount offered for both maturities was 275 billion. Yields at cut off price for the 2 year was 13.125% while the 10 year was 14.850%.
In the regional currencies, the Kenya shilling held strong helped by inflows from horticultural exports and end month NGO conversions. The demand remained subdued with currency holding up at 103.04/60; as the markets were also keenly awaiting the Parliament decision on the rate cap.
In Tanzania, the currency was wobbly, trading at 2300/2310, undermined by elevated demand mainly from telecoms and importers.
He noted that the global markets saw the Euro gain as the US dollar weakened after the Federal Reserve cut interest rates for the third time this year, but left open the question of whether it would cut rates further.
"The lack of explicit signal on the future direction was taken as less hawkish than expected, and this drove the greenback lower," Kaboyo said.
In Britain the pound was stable following the agreement on an early election, with markets responding positively.
However on Friday, November 1, 2019, the Ugandan shilling strengthened slightly versus the dollar supported by dollar inflows due to decreased demand for US currency, traders said.
Commercial banks quoted the local currency at 3,706/3,716 during Friday's afternoon trading session against the dollar from 3,709/3,719 of the morning session.
"Outlook indicates that the shilling is likely to remain bearish as cyclical demand take centre stage with importer demand exerting pressure." Kaboyo added.