The local unit strengthened against the U.S. dollar as activity on the FX supply counter outmuscled demand in Thursday’s trading session.
The central bank pumped dollars into the local foreign exchange market, outpacing waning demand, and pushed the home unit higher by 40 shillings at the closing bell.
We see the USDUGX currency pair trading within recently established ranges, albeit with a bullish bias in the near term, as market participants lookout for fresh factors to offer price direction.
The dollar index which tracks the greenback’s strength against a basket of currencies plunged by 1.5% on Thursday, on the back of an unparalleled surge in the number of people filing first-time claims for state unemployment insurance.
3.28 million Americans filed for unemployment benefits compared to 285,000 the previous month, indicating the negative impact of the coronavirus pandemic on the American economy.
As long as the Covid-19 crisis continues and the world economy is effectively in lockdown, markets will remain in turmoil.
The euro gained 0.85% on the day and the highest since March 18. The dollar is on the defensive, courtesy of risk-on and weak labour market data as declining yield differentials favour further gains in the single currency.
Sterling surged 2.43% on Thursday owing to dollar weakness. Bank of England left the rate and bond purchases unchanged during yesterday’s MPC meeting but left the room to expand its bond-buying program.