UGANDA, Kampala | Real Muloodi News | The foreign exchange market indicated that the Uganda shilling appreciated against the US dollar this week, supported by remittance inflows and commodity earnings.
The Bank of Uganda reported that on Friday morning, May 3, the Uganda shilling opened at a buying rate of USh3,790.63 and a selling rate of USh3,800.63 per US dollar. By midday, the shilling had strengthened further, trading at USh3,784.79 buying and USh3,794.79 selling.
Catherine Kijjaggulwe, Head of Trading at Absa Bank Uganda, confirmed the one-sided appreciation of the shilling.
“The trend was one-sided during the short week with the shilling strengthening as we transitioned from April into May 2024,” she said. “The unit opened Monday’s session at 3810/3820 levels and gained ground to trade at highs of 3782/3792 on Friday morning, comfortably breaching below the 3800 psychological level.”
Kijjaggulwe added that month-end inflows, remittance flows, and commodity flows entered the market steadily. Dollar buyers purchased low volumes with anticipation of further shilling strength in the coming days.
She highlighted that the next key level markets are monitoring is trading at the 3750 level. The expectation is that dollar inflows could sustain the shilling’s further strength, while some residual demand could arise from expected dividends between May and June 2024.
Market activity has been forecasted to trade within the range of Shs3750 per US dollar buying and Shs3830 selling levels in the near term.
Regarding market conditions, Kijjaggulwe noted that liquidity remained tight in the Money Markets during the week, with overnight yields trading between 11% and 13% levels.
Looking ahead to next week’s market activities, the Bank of Uganda is scheduled to hold a Treasury Bill auction on Wednesday, May 8, 2024.
Kijjaggulwe also referenced the Bank of Uganda’s decision to raise its policy rate, the Central Bank Rate (CBR), in April in anticipation of a rise in inflation.
On the US side, Kijjaggulwe mentioned the Federal Reserve’s rate announcement on Wednesday.
The US central bank left rates unchanged in their current range of 5.25% to 5.50%, with ongoing concerns about the inflation trend in the coming months.
READ MORE LIKE THIS:
Uganda Shilling Depreciation: Implications and Economic Trends