Uganda shilling gains ground against US dollar this week
Inflationary pressures continue to pose challenges due the depreciation of the shilling. Photo / File
What you need to know:
- The Bank of Uganda decided to raise its policy rate, Central Bank Rate (CBR) in April in anticipation of a rise in inflation.
The foreign exchange market for this week has indicated that the Uganda shilling appreciated against the US dollar this week supported by remittances inflows and earnings from commodities.
The Bank of Uganda reported that on Friday (May 3) morning, the shilling opened at a buying rate of Shs 3,790.63 and a selling rate of Shs 3,800.63 per US dollar. By midday, the shilling had gained further strength, trading at Shs 3,784.79 buying and Shs 3,794.79 selling.
Ms Catherine Kijjaggulwe, Head of Trading at Absa Bank Uganda, confirmed the one-sided appreciation of the shilling.
“The trend was one-sided during the short week with the shilling strengthening as we transitioned from the month of April into May 2024, unit opened Monday’s session at 3810/3820 levels and gained ground to trade at highs of 3782/3792 on Friday morning comfortably breaching below the 3800 psychological level,” she said.
Ms Kijjaggulwe said month end inflows, remittance flows and commodity flows trickled into the market steadily as dollar buyers purchased low volumes with anticipation of further shilling strength in the coming days.
She explained that the next key level markets are now watching out for is the trading at 3750 level and if dollar inflows will sustain shilling's further strength or if some demand tickets may come through with some residual dividends expected between May and June 2024. The trading range is anticipated between the Shs3750 per US dollar buying and Shs3830 selling levels in the near term.
Speaking about market conditions, she said liquidity remained tight in the Money Markets during the week with overnight yields trading between 11.00 percent - 13.00 percent levels.
About market activities next week, Ms Kijjaggulwe said the Bank of Uganda is scheduled to hold a Treasury Bill auction on Wednesday May 8, 2024.
The Bank of Uganda decided to raise its policy rate, Central Bank Rate (CBR) in April in anticipation of a rise in inflation.
However, on the other hand, Ms Kijjaggulwe said the highly anticipated Federal Reserve (US central bank) rate announcement happened on Wednesday and as expected, the US central bank left rates unchanged in their current range of 5.25 percent to 5.50 percent with continued concerns about the inflation trend in the coming months.
