Money Markets: Uganda Shilling Maintains Lead over US Dollar amidst Fund Drops in Trading Week

The Ugandan shilling, again this week, traded higher than the United States dollar, amidst a drop in shillings at the end of this trading week.

The Shilling traded at a range of 3795/3805 for buying and selling respectively.

Stephen Kaboyo, the Executive Director of Alpha Capital Partners, says that in the shilling interbank money market on May 7, 2020, funds dropped to 5% yet it had held at 5.5% during the course of the week.

“This is the lowest level in the past and an indication of low lending activity amongst the banks,” he said.

For the last two consecutive weeks, the Shs traded higher than a dollar at a range of 3780/3790 in the first week and 3800/3810 in the second one for buying and selling respectively.

Kaboyo notes that the Shs closed the week steady riding on the positive sentiment generated by the news of the International Monetary Funds (IMF) disbursement designed to assist the country deal with the economic effects of Covid 19.

“The Outlook indicates that the shilling will continue to garner support in the coming weeks from the positive news of the IMF loan disbursement although expected with a lag, but will boost the dollar reserve position and keep markets confidence high,” says Kaboyo

The assessment conducted by Alpha Capital Partners in the money markets this week indicates that a treasury bill with Shs 145bn was also conducted in the fixed income market.

“The amount was significantly lower than usual,” Kaboyo said adding that, “Yields slightly dropped to 8.771%, 11.001% and 12.500% for 91,182 and 364-day tenors.”

According to Kaboyo, the market uptake was high as reflected in the bid to cover ratios of 2.11, 4.14, and 2.56.

The assessment further shows that there was stability of the Kenyan shillings (KES) and Tanzanian shillings, in the regional markets. “KES was supported by diaspora flows amid weak dollar demand in the local market, while in Tanzania both demand and supply was evenly matched,” Kaboyo further explained.

He said that the global markets continued to be ruled by the theme of flocking to certainty.

“The market dynamics supported the US dollar to ascend to a two week high against all major currencies on safe-haven bids in the wake of the dire global situation,” he said.