Uganda shilling firms as foreign currency inflows offset dollar demand

KAMPALA — The Uganda shilling strengthened last week as fresh foreign currency inflows offset corporate demand for dollars, according to market analysts.

The local unit closed Thursday at 3,555/3,565, firmer than the 3,565/3,575 levels seen earlier in the week when heavy demand from the manufacturing and energy sectors caused brief volatility.

Richard Nsubuga, a market analyst, said the weaker levels early in the week attracted renewed inflows from remittances, commodity exporters and portfolio investors. He noted that market participants expect balanced conditions in the near term, with the shilling projected to trade between 3,450 and 3,610 in coming sessions.

Money market liquidity remained tight. A report from Absa indicated that overnight and one-week rates rose to 10.58% and 11%, respectively.

Stephen Kaboyo, managing director at Alpha Capital, said the current macroeconomic backdrop and disinflationary trends suggest a slight interest rate cut could be possible.

In regional markets, the Kenyan shilling remained stable, holding between 128.85 and 129.25 against the dollar amid subdued activity.

Globally, the dollar index hovered around 97.9 on Thursday. U.S. economic data showed job openings at their lowest level since 2020 and initial jobless claims climbing to a two-month high of 231,000, exceeding forecasts.

In Europe, the European Central Bank held interest rates steady during its first meeting of 2026. The main refinancing rate remained at 2.15%, while the euro traded near $1.18.

The British pound weakened below $1.36 after the Bank of England maintained rates at 3.75%. Investors were surprised by a narrow 5-4 vote split, with four policymakers favoring a rate cut, signaling that reductions may arrive sooner than expected.

In commodities, gold prices retreated below $4,700 per ounce, down from the previous week’s record of $5,600. Oil prices steadied, with West Texas Intermediate near $63 per barrel and Brent slipping below $68. The price stability followed remarks from President Donald Trump suggesting potential negotiations with Iran, which eased supply disruption fears.

The cryptocurrency market saw significant declines. Bitcoin, which started the week near $80,000, touched lows of $60,000 by Friday. Ethereum followed the downward trend, falling from $2,300 to lows near $1,900.