KAMPALA, Uganda–The Uganda shilling weakened against the U.S dollar on Wednesday with the USD/UGX pair tacking on 5 shillings to rest at the 3685/3705 levels from 3680/3700 levels previously.
The local unit suffered losses after a pickup in greenback demand from importers and commercial banks keyed into the forex market later in the day. In the short term, it remains unlikely that the shilling will recover from recent nose dive as greenback demand activity continues to override the supply.
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 remained under pressure against a basket of major currencies as mixed economic data offset easing trade war fears. Data showed growth in the labor market as private payrolls grew by 241,000 in March beating economists’ forecast for 208,000 new private sector jobs. ISM non-manufacturing sector data for March, fell to a reading of 58.8 missing expectations for a reading of 59.
Trade war fears are expected to fade amid growing expectations that both China and the U.S. were open to a negotiation on trade as both sets of recently announced tariffs from the two nations have not yet gone into effect.
The Euro rose 0.2% against the greenback, shrugging off soft Eurozone inflation data. Core CPI remained unchanged at 1.0%, within ECB’s mandated inflation target though below an anticipated reading of 1.1%.
The GBP/USD rose 0.17% to $1.4082 despite a plunge in UK construction PMI as poorer weather in March weighed on construction activity.