The Ugandan shilling was stable on Friday, with dollar inflows from commodity exports and remittances lending support, traders said.
A Centenary Bank report indicates that the dollar’s surge to new highs, even as monetary authorities around the world jack up interest rates or intervene to support their domestic currencies, shows that central banks fighting the ‘reverse currency war’ are doomed.
Sterling tumbled nearly 5% to an all-time low on Monday as investors ran for the exits after the new government’s fiscal plan threatened to stretch Britain’s finances to their limits.
The Central Bank quoted the shilling at 3824/34 buying and selling respectively in the first trading session on Monday.
Richard Nsubuga, a trader at Absa Bank Uganda noted that the shilling had closed stronger at 3820/30 last week. “Dollar demand from players in the telecom, energy and manufacturing sectors was absorbed by inflows from remittance firms and offshore investors,” he said.
Liquidity in the money markets continues to be tight with overnight averaging at 10.99% and one-week funds at 11.30%. Nsubuga pointed out that Bank of Uganda will conduct a treasury bill auction this week worth Ugx 285 billion with decent participation is expected from market players.
Market Outlook: The shilling is forecast to trade stable against the dollar.