The Uganda shilling was constrained within the 3695-3715 band in yesterday’s session, with minimal and balanced activity on both the demand and supply counters.

Shilling depreciates against dollar on first day of trading week

The Uganda shilling depreciated on the first trading day of the week closing at the 3675/3695 levels lower than previous.

Renewed dollar demand from interbank players and merchant importers exerted undue pressure on the local unit amid a dearth of much anticipated inflows from charity organisations.

We expect a similar narrative today with a bias tinge towards a weaker shilling. High liquidity in the money market prompted the regulator to absorb Ugx 281bn for 3days.

The overnight and 1week interbank lending rates are running between 8.5-10.5 percent and 10.0-10.25 percent respectively.


Dollar advances against basket of currencies

The dollar advanced against a basket of major currencies on Monday, shrugging off data that showed a slip in U.S. factory orders. Factory goods orders fell 0.6% amid lower demand for machinery, missing economists’ forecasts for a rise of 0.3%.

The weaker-than-expected factory orders data did little to keep a lid on the greenback. The Euro started the week on a weak note after failing to hold above the 1.15-mark last week.

The pair traded at 1.1425 levels, weighed on by poor data which showed that the Eurozone Producer Price Index in January declined by 0.8% on a monthly basis and dragged the annual rate down to 3.00% from 4.00% recorded in December.

The pound gave up some of its gains against the greenback even as reports emerged that goods shipped to Britain from the EU could be waved through without checks in the event of a no-deal Brexit. The Irish backstop issue remains the overarching factor weighing on the sterling, with the EU showing little signs thus far of flexibility on the issue.