The local currency strengthened on sustained inflows that outstripped demand as markets reacted to fresh COVID-19 lockdown measures. Bid and ask hovered around 3510/20.
In fixed income, yields on Uganda government paper fell on 2 and 10 year by average 200 basis points to 11.500% and 13.739%. Falling long term yields and renewed demand for yield by both local and foreign investors may tempt the government to lock in lower rates.
In the regional markets, the Kenya shilling was stable, but traders expected it to weaken due to increased demand from energy and food importers. Trading was in the range of 107.55/108.05.
In the international markets, the dollar was down slightly in a choppy session in which it alternated between losses and gains as investors digested elevated US inflation data and the rhetoric from European Central Bank.
On the the overall investors adopted a wait and see attitude sucking volatility form the markets leaving major currencies mostly range bound.
Going forward, the overall trend indicate a firm shilling against a backdrop of the second wave of COVID 19, that is disrupting business activity. While on the monetary policy front, the Central Bank is expected to maintain an accommodative policy bias at its upcoming meeting.
June 4 – June 11, 2021: Weekly financial markets review and outlook with Stephen Kaboyo
Stephen Kaboyo, Founder and Managing Director Alpha Capital Partners
