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The Uganda shilling concluded the week on a positive note, exhibiting strength against the US dollar in recent market activity. The shilling closed at levels of 3910/3920, showing improvement from the day’s opening rates of 3920/3930.
According to Catherine Kijjagulwe, the head of trading at Absa, the local currency received support from residual month-end inflows, contributing to decreased demand for foreign exchange towards the end of the week. This reduction in demand coincided with interbank players cutting their long dollar positions, further bolstering the shilling’s performance.
The money markets remained relatively liquid on Friday, with overnight yields averaging at 11.22%. Additionally, there are no scheduled government securities auctions slated for the upcoming week, contributing to market stability.
Benoni Okwenje, head of financial markets at Centenary Bank, noted a reversal in the currency’s trajectory over the week. The shilling demonstrated strength, moving from levels of 3945/55 earlier in the week to the closing rates of 3910/3920. Okwenje attributed this shift primarily to interbank dollar selling, as several players opted to reduce their long dollar positions. Furthermore, there was a sentiment that the currency depreciation had reached its peak, with limited demand observed at levels exceeding 3950.
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The observed trends reflect a dynamic interplay between market forces and investor sentiment. As interbank players adjust their positions, the Uganda shilling experiences fluctuations in its value against foreign currencies. The recent strengthening of the shilling underscores its resilience and stability within the domestic financial landscape.
Market analysts anticipate continued monitoring of interbank activities and their impact on currency movements in the coming weeks. While external factors may influence short-term fluctuations, the overall outlook remains optimistic, with the Uganda shilling demonstrating resilience amidst evolving market dynamics.
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