Traders anticipate G77, NAM to boost forex supply

The Ugandan shilling experienced a rebound, recovering from early-week losses as it tested the 3800 level. This upward movement was supported by dollar inflows from coffee exporters, offsetting market demand pressures.

Already, government has projected nearly $1b (about sh3.7 trillion) worth of investment deals in different economic sectors from the Non-Aligned Movement (NAM) and G77.

“In the coming week, the shilling is expected to oscillate in a narrow range. On the demand side, it is anticipated that fuel importers will have strong presence in the market as the economy gets back into full swing. On the supply side, it is expected that forex supply may improve somewhat as the country prepares to host the G77 and NAM international conferences,” Stephen Kaboyo, managing director at Alpha Capital, says.

On Friday last week, the unit traded within the 3795/3805 level as supply and demand for hard currency were relatively balanced.

“Activity is expected to pick up in the coming weeks as business fully resumes after the festivities. The unit is likely to trade within the 3760/3840 trading levels in the near term,” Catherine Kijjagulwe, head of trading at Absa, says. In the fixed income market, money markets faced tight liquidity conditions due to residual year-end taxes and as the mid-month tax period also sets in. Overnight yields traded between 9.50% – 11.00%. Bank of Uganda is scheduled to hold a sh235b treasury bill auction on January 17, 2024.

In the regional market, renewed dollar demand from corporate clients has led the Kenya shilling to weaken further to trade at the 160.5 level. Funding pressures in the Money Markets have slightly eased. The Kenya shilling is anticipated to remain weak within the 158.00 -162.00 levels.

In the global markets, US inflation print for December was slightly higher than expected at 3.40% as traders slightly triggered mixed sentiment if the Federal Reserve cuts rates in March 2024. The Pound traded at $1.2725 and the Euro at about $1.0935 on Friday. UK GDP print came in at 0.3% above the market estimate of 0.2% though the economy is still weak overall. In the commodities market, Brent Crude traded at $80.02 a barrel and West Texas Intermediate traded at $74.60 a barrel after the United States and Britain strikes against Houthi Military targets in Yemen who have disrupted shipping in the Red Sea which is a key trade route. Gold traded at $2046 an ounce.

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