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Uganda shilling weakens against US dollar

By Julius Businge

The Uganda shilling weakened in the week against the dollar testing 2510/20 midweek on the back of global risk aversion.

Denis Mashanyu, a forex trader at Standard Chartered Bank said the local unit later recovered to settle in the same region it had opened of 2470/80. The recovery was attributed to the auction related flows as the yields remained unchanged with 1 year paper at 20.03% keeping it more attractive for investors.

Mashanyu said in a statement released on May 18 that the central bank was active in the market mopping up excess liquidity through repos in their efforts to maintain stability in the cash markets.

“On the global scene, risk appetite continued to fall away during the week  with gold, oil, copper, and emerging market assets falling away,” he said, “as did equity markets and the EUR and commodity currencies.”

Experts say, part of the blame for this goes to the ongoing Greek drama where elections have been called next month as the squabbling political parties failed to cobble together a government. This looks to leave the door wide open for anti-austerity parties to garner more votes, and these look to be more open to putting Greece’s Euro zone membership at risk.

Next week, experts expect the offered tone to remain in the market with the pair trading in the 2450-2500 range keeping an eye on the euro zone story.

The central bank is issuing 2 and 5 year bonds next week with Shs50billion in each tenor and they are expected to be well received with major players looking for duration.

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