On Friday, the Uganda shilling experienced a decline in value, closing weaker at 3775/3785 levels compared to the day’s opening of 3760/3770. This depreciation was attributed to heightened demand from both interbank and offshore players, particularly during the afternoon session.
According to data from Absa, overnight yields averaged at 12.28%, indicating tight liquidity conditions throughout Friday’s trading session. The increased demand for foreign exchange was primarily driven by the necessity to acquire dollars for settling import transactions and fulfilling other foreign exchange obligations.
Commenting on the market dynamics, Stephen Kaboyo, the managing director at Alpha Capital, remarked that although the shilling has shown resilience by establishing resistance at 3800, maintaining this strength will be challenging given the multitude of local factors influencing the currency’s performance.
Looking ahead, the Bank of Uganda is scheduled to conduct a treasury bill auction on May 22, 2024. This event is expected to have implications on market liquidity and may influence trading patterns in the foreign exchange market.
The fluctuation in the value of the Uganda shilling underscores the impact of supply and demand dynamics, as well as broader economic factors, on the currency’s stability. Market participants will continue to monitor developments closely, adjusting their strategies in response to changing conditions in the foreign exchange market.
