Shilling remains firm as companies lock in cash for year-end tax deadlines

KAMPALA, Uganda — The Uganda shilling held firm against the U.S. dollar last week as corporations preserved local currency to meet end-of-financial-year tax obligations.

Companies are required to review, adjust and pay their final provisional tax estimates by the close of the financial year to avoid under-provision penalties.

During the week, the shilling traded in a narrow range of 3,755 to 3,775 and was quoted at 3,765/3,775 on Friday, unchanged from levels seen at the start of the week.

Richard Nsubuga, a market analyst at Absa, said commercial supply and demand remained largely matched, helping keep the currency stable despite uncertainty in global markets.

Robert Mpuuga, the head of treasury at Exim Bank, said the local unit is expected to trade within the 3,750 to 3,770 range, supported by exporter inflows and mid-month tax-related dollar sales.

Stephen Kaboyo, the managing director at Alpha Capital, noted that the currency has faced lingering downward pressure driven primarily by the energy shock as a catalyst for U.S. dollar demand, which has triggered widespread currency realignments.

Government securities attracted strong investor interest at Wednesday’s Treasury bond auction, where yields edged higher amid sustained government borrowing needs and robust secondary market demand.

The benchmark three-year bond cleared at 13.3 percent, while the 10-year and 20-year papers settled at 15.625 percent and 16.5 percent, respectively. The government accepted 1.676 trillion shillings in bids, representing an acceptance rate of 169 percent. The Bank of Uganda is scheduled to return to the primary market June 17 for the final Treasury bill auction of the 2025/26 financial year.

In the regional market, the Kenyan shilling weakened slightly, with the dollar trading at 129.50/129.65. Market reports attributed the move to corporate demand linked to dividend payments alongside subdued dollar inflows from tea exports and remittances. The Kenyan currency is expected to trade between 129.20 and 130.20 in the near term.

Globally, the U.S. dollar index rose to around 99.8 on Friday, though it remained below recent highs after comments from U.S. President Donald Trump raised hopes of a possible peace agreement with Iran. The prospect of easing tensions in the Middle East weighed on oil prices and reduced demand for traditional safe-haven assets.

The euro remained under pressure below $1.15 despite the European Central Bank raising interest rates by 25 basis points, while the British pound traded just under $1.34 as markets priced in the prospect of tighter monetary policy from the Bank of England.

In commodities, Brent crude fell to about $89 a barrel, its lowest level in nearly two months, after Trump suggested an agreement with Iran could be reached. Gold prices also declined, slipping below $4,450 an ounce and heading for a weekly loss of more than 2 percent as investors reassessed inflation and interest rate expectations.

In cryptocurrency markets, bitcoin and ethereum experienced volatility with an overall bearish to stabilizing tone during the week. Bitcoin opened and closed the week at $63,000.