Business
The Ugandan shilling registered losses this week after maintaining a range-bound trend since September. The currency fell past its long-standing support level and tested a new threshold at 3700.
Stephen Kaboyo, Managing Director at Alpha Capital, attributed the shilling’s decline to increased demand, particularly from energy and import sectors.
“The strength is always determined by the demand from energy and importers who buy dollars using local currency to facilitate their trade. Similarly, the energy sector consumes substantial amounts of dollars,” Kaboyo explained.
In the fixed-income markets, treasury bill yields remained steady as the Bank of Uganda (BOU) worked to eliminate outlier bids that exceeded acceptable thresholds.
Experts suggest that yields are unlikely to increase further due to ongoing efforts to manage rising debt servicing costs.
Last week, the shilling remained range-bound as corporate entities focused on mid-month tax payments, which significantly drained liquidity from the market.
Looking ahead, the shilling and other risk-sensitive currencies are expected to remain under pressure as global markets adjust to policy uncertainties, including potential US inflationary pressures that could influence the Federal Reserve’s monetary stance.
Kaboyo forecasts that as the year approaches its end, seasonal remittances might bolster dollar supply, but the resurgence in demand is likely to keep the shilling vulnerable.
“Markets will closely monitor remittance flows for indications of improved supply, but demand pressures remain a concern,” he noted.
