The Uganda shilling was set to end the week mostly flat, a bit firmer cushioned by tight liquidity conditions mainly on account of end year corporate tax obligations that sucked out shillings in the market coupled by aggressive mop by the Central Bank through non calendar bond issue across the entire yield curve that collected in excess of 500 billion against a target of 780billion. Trading was in the range of 3755/65.
The non calendar issuance highlighted the need by the treasury to raise financing in order to meet end of fiscal year commitments.
In other peer markets, most currencies gave up gains as the dollar continued to strengthen following a hawkish Federal Reserve that indicated it will remain vigilant and continue to fight the surging inflation that remains a big risk to the global economy.
In the global markets, worries about the risk of global recession drove a rally in the safe haven dollar while risk sensitive currencies dipped. As markets enter the second half of the year, the first half stands out as the most turbulent the global markets have seen.
In the short term, while the rate of depreciation has slowed , pressure from offshore investor sell off coupled with frail economic backdrop will continue to exert negative spillover effect on the local unit.