A persistent lack of dollar demand continued to boost the performance of the shilling against the dollar on Tuesday.

Local currency edges higher against the U.S. unit

The Uganda shilling had an ally in the opening session of the week, in the form of weak foreign currency demand, resulting in the local currency edging higher against the U.S. unit.

The home unit was up 10 shillings on the day, with the USD/UGX currency pair trading within the 3685-3705 range at the closing bell, on the back of frivolous dollar demand.

We see competing forces taking centre stage in the local currency market, limiting the movement of the home unit against the greenback within familiar ranges.

Dollar index falls

The U.S. dollar index fell to an almost-two-week low after weak services data, while trade tensions between the U.S. and China prompted a selloff of the Chinese Yuan.

Growth in the services sector fell to its weakest level since August 2016, with trade worries weighing on business orders, the ISM non-manufacturing survey showed.

The euro was up against the dollar supported by reduced risk appetite on heightened U.S.-Sino trade war fears. Sterling fell again after media speculation over the weekend that Prime Minister Boris Johnson was preparing for a general election. The pound shed 0.5% to $1.2105, not far from its two-year low of $1.2080 touched last week.