The Uganda shilling was set to end the week on a weaker tone, reversing the gaining streak on rebound of strong demand mainly from importers and commercial banks squaring positions. The unit crossed over into 3800 territory on both bid and ask. In regional currencies, the Kenya shilling weakened to trade at 119.40/60 as business activity resumed after the general elections .
With the recent development on UGX/USD a pair, it is expected that inflation numbers will reflect high pass through effects of the shilling weakness going forward.
In the fixed income market, the rising trend in yields continued, however the gradual rise may not pose an imminent threat because of BOU’s restrictive approach towards outlier bidders demanding a higher risk premium.
Yields came out at 9.148%,11.000% and 13.500% for 91, 182, and 364 days respectively.
In the global markets, the dollar climbed as euro and sterling plunged as recession clouds gathered over eurozone economy highlighting the relative outperformance of the US economy.
Going forward, the consequent decline in dollar supply against high demand will continue to impact the shilling performance. However from the external environment, the Federal Reserve indication of slowing the pace of interest rate hikes in tandem with signals of slowdown in inflation could be shilling positive .
