KAMPALA, Uganda–The Uganda Shilling traded a tad lower at the 3705/3725 levels versus its U.S dollar counterpart on Thursday as increased bustle on the greenback demand counters dominated mostly muted supply activity.
Losses in the home unit were however limited by the regulator’s monetary tightening action, absorbing Ugx 550 billion of excess liquidity from the local money market space.
Ahead of the weekend, a further slump of the Uganda shilling remains on the cards on the back of an uptick in hard currency demand from the manufacturing and energy sector.
The U.S dollar fell against its rivals on Thursday after data showed further evidence of a slowdown in U.S inflation. The Labor Department reported that its Consumer Price index rose 0.2% last month missing expectations for a 0.3% rise, while year on year, the CPI rose 2.1% in April missing economists’ forecast.
Some analysts said the timid inflation report was not bearish enough to derail a Federal Reserve rate hike. However, it would likely scale back expectations for the Federal Reserve to add another rate hike to its currently projected two rate hikes.
The GBP/USD fell sharply before recovering some losses to trade at $1.3504, down 0.32%, after the Bank of England, as expected, revealed an unchanged decision on interest rates but slashed its forecasts for growth.
The EUR/USD pair rose by 0.51% to $1.1911 amid an increased possibility that a government of antiestablishment parties in Italy comes into power, which would end weeks of political gridlock.