Overview:
Market analysts predict continued stability for the Uganda shilling, driven by commodity inflows, despite global currency market fluctuations and U.S. Fed policy.
KAMPALA, Uganda — The Ugandan shilling remained stable against the U.S. dollar last week, trading in the 3,650-3,670 range.
Traders attributed the stability to strong dollar inflows from commodity exporters and offshore investors, coupled with subdued demand throughout the week.
Market analyst Richard Nsubuga predicted the shilling would maintain its stronger position in the near to medium term, supported by continued commodity inflows.
Stephen Kaboyo, managing director at Alpha Capital projects, noted that the “shilling price action indicates potential trend continuation” and that the currency would likely “trade within the confines of the well-established resistance level, exhibiting a mode of stability in the short run.”
Money markets showed liquidity last week, according to Absa market data, with overnight and one-week funds averaging between 7.00% and 12.00%. On Thursday, the Bank of Uganda conducted an open market operation, absorbing 625 billion shillings ($170.9 million) from the interbank money markets through a seven-day repo.
In the debt market, yields from Wednesday’s treasury bill auction were flat for the 364-day maturity, while the 182-day yield decreased by 10 basis points. The 91-day, 182-day, and 364-day maturities cleared at 12.000%, 12.699%, and 15.002%, respectively.
The auction saw strong investor demand, with accepted bids totaling 397 billion shillings ($108.8 million), exceeding the offered amount of 355 billion shillings ($97.3 million). Market attention is now focused on next week’s Treasury Bond auction, where the central bank will reopen the benchmark three-year, 10-year, and 20-year maturities.
Regionally, the Kenyan shilling strengthened against the dollar last week, trading between 129.20 and 129.50. However, analysts anticipate potential pressure on the Kenyan currency due to increased demand from portfolio investors and energy sector players, with an expected trading range of 129.00-129.60 in the near term.
Globally, the U.S. dollar index rose towards 101 on Friday, supported by positive global trade signals and growing expectations of delayed interest rate cuts. A key driver was President Donald Trump’s announcement of a preliminary trade agreement with the UK. Trump also suggested potential further agreements and a possible reduction in tariffs on China, depending on upcoming trade negotiations in Switzerland.
Federal Reserve Chair Jerome Powell, in a speech on monetary policy, dismissed the possibility of an early rate cut to counter potential economic impacts from tariffs, citing heightened risks to both inflation and unemployment. His remarks reinforced market expectations of a cautious approach by the Fed.
In commodities, gold prices hovered around $3,320 per ounce on Friday, holding onto recent losses as optimism surrounding U.S.-China trade talks reduced the appeal of safe-haven assets. Officials from both countries are scheduled to meet this weekend, raising hopes for progress in resolving trade disputes.
West Texas Intermediate crude futures extended gains to $60 per barrel, supported by renewed optimism over U.S.-China trade talks. Earlier in the week, the commodity had fallen to $56.5 per barrel amid concerns about global demand and geopolitical tensions.