KAMPALA – The Uganda Shilling inched higher against the U.S. dollar yesterday, trading at the 3725/3745 levels stronger than Tuesday’s close. Continuous fading greenback demand from interbank players and Central bank liquidity mop up played a big role in uplifting the shilling to current levels. We expect the home currency to cling to its gains as steady foreign currency inflows from various sectors continue to manifest. Today, the money market will be awash with liquidity from repo and deposit auctions and subsequently, tightening operations are expected in a bid to support the home unit.
The U.S. dollar continued to give up gains against its rivals on Wednesday following subdued inflation data and a rise in sterling after UK Prime Minister Theresa May secured support from her Cabinet for a draft Brexit deal. The Labour Department said its core consumer price index rose 0.2% last month, in line with economists’ estimates, but for the 12 months through October consumer prices rose 2.1%, lower than forecasts.
The subdued inflation report, however, did little to puncture optimism for further rate hikes, with analysts touting further room for prices to increase in the year ahead. The Pound gained to $1.3029, after earlier falling to a low of $1.2882 as the U.K. Cabinet approved a draft Brexit plan, removing a key hurdle to finalize a divorce deal with the European Union. The EUR/USD rose to $1.1310 after Italy re-submitted its draft budget for 2019 to the European Commission, but left its growth and deficit forecasts unchanged, raising the risk of backlash from lawmakers in Brussels.
Source: Commercial Bank of Africa Uganda