Shilling likely to depreciate on further lockdown easing

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By Stephen Kaboyo

Outlook suggest that the shilling will likely be on the edge, trading with a weaker tone in the coming days with the anticipation of reopening the countries borders and the international airport. This will likely increase demand for forex and push the shilling into a bearish territory.

In the local markets, a stronger dollar and domestic economic dynamics weighed on the currency mid week. The shilling gave back some gains of the previous session to trade at 3685/95 compared tp 3670/3680 at opening of the week.

The fixed income segment continued to lure investors hungry for stable returns. Markets have taken a view that with controlled inflation, easing cycle expected to remain firmly in place given continued policy focus on reviving domestic economic activity and sustained fiscal requirements , Uganda government treasuries will remain a safe bet. The 3 and 10 year bonds were heavily oversubscribed.

In the regional markets, the currency of EAC biggest economy was on the back foot on account of elevated demand. Markets were counting on Central Bank intervention to improve dollar supply as has been the practice lately. Trading was in the range of 108.20/40. While in Tanzania, the shilling was flat, with election fever taking centre with a slow down in market activity.The shilling held at 2313/2323, unchanged from the previous week.

In the global markets the US dollar steadied against the major currencies as traders awaited key US job data that was expected to shed light on the strength of economic activity and the pace of recovery from the pandemic.
Trading among other major currencies remained muted with the Euro and Sterling staying roughly flat as investors held their bets.

By Stephen Kaboyo

The author is the managing director at Alpha Capital Partners 

 


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