Shilling to buoy within 3660-3750 range as clients slowly settle into new FY

The shilling opened the week trading at the 3665/3675 level and weakened during the week to trade at 3690/3700 during Friday’s opening session.

With end-of-financial year taxes out of the way, pockets of corporate demand started to trickle into the market during the week, outweighing the flows from the commodity exporters and NGOs.

Catherine Kijjagulwe, head of trading at Absa Bank Uganda said the currency is still likely to buoy within the 3660-3750 range as clients slowly settle into the new financial year unless demand picks up significantly in the coming weeks.

Money markets were liquid during the week with overnight yields trading between 8 per cent and 10 per cent. Bank of Uganda was in the market during the week to mop up the excess liquidity through their open market operations. The Central Bank held a treasury bill auction and yields in the 91-day, 182-day, and 364-day tenors cleared at averages of 10.198 per cent, 11.001 per cent and 12.002 per cent respectively.

Bank of Uganda is scheduled to hold a Shs 450 billion 3-year and 20-year treasury bond auction next week on Wednesday, July 12, 2023. Despite healthy inflows during the week from NGOs and the manufacturing sector, there are still dollar demand pressures from the corporate sector that are keeping the Kenyan shilling weak.

The unit is still anticipated to trade within the 140.00–142.00 trading range. Kijjagulwe said the dollar regained ground during Thursday’s trading, propped up by a better-than-expected purchasing managers index print of 53.9, a rise in private payrolls to 497,000 workers all of which pointed to a recovery in the US Economy and continued expectation of a Fed rate hike at the next sitting.

The Euro traded at lows of $1.0832 (Shs 4,001) on Thursday and later closed the day at $1.0887 (Shs 4,021). The pound was also relatively weak against the dollar but managed to trade above the $1.2700 level on Thursday.

Brent Crude traded at $76.86 (Shs 283,927) a barrel and West Texas Intermediate traded at $72.12 (Shs 266,417) a barrel. The prices were marginally higher due to production cuts by Saudi Arabia and Russia, though key factors markets are looking out for is when the global demand, especially from China will pick up. Gold traded at $1,914 (Shs 7,070,490) an ounce.