The Ugandan Shilling this week, traded flat against a muted demand for the US Dollar. The shilling was on one hand supported by end month flows from charities and coffee export inflows coupled by Bank of Uganda liquidity mop-up operations that took out UGX839 billion equivalent to USD222 million.
In the interbank Shilling market overnight funds traded at an average 5.1% while one-week funds traded at 6%.
Regional markets
In the regional currency markets, the Kenya Shilling was on the ropes, undermined by elevated end of month demand from manufacturers and importers. Market players were also seen building positions ahead of expected dividend payments. Trading was in the range of 107.10/30
The South African Rand climbed to its highest level in nearly 9 weeks, riding on positive sentiment boosted by optimism as economies opened up from lockdown. The Rand traded at 17.3100 per dollar.
Global Markets
The US dollar fell to a near 2 month low as global risk appetite improved on account of major economies gradually easing on Covid-19 restrictions. In Britain, the Pound rose o.5% against the Dollar, while in the Eurozone, the common currency stood tall, gaining support from the announced Euro 750 billion Covid-19 recovery fund that gave European markets a sense of optimism.
Outlook for the Shilling
The Shilling is expected to hold steady, with its price action largely driven by risk sentiment, which is leading markets to favour riskier assets. Another critical market factor to watch in the next couple of weeks is the direction of market players towards taking positions ahead of the “Covid-19“ budget presentation for FY2020/21.
