The Uganda shilling was under stress trading above the key psychological level of 3800 for the first time in months. Towards closure of the week the unit cooled off, lifted by the Central Bank dollar selling intervention and the hawkish monetary policy stance. This however was seen as temporary respite before persistent demand builds up again. In the regional markets, most Central Banks took similar hawkish actions to curb the soaring inflation across all economies.
In the fixed income market, Bank of Uganda privately placed debt in multiple tenors outside the normal schedule. A move seen as raising financing ahead of closure of the fiscal year to meet the revenue shortfalls while managing the risk premium that would otherwise manifest at this time of the year.
In the global markets, the dollar rose as treasury yields climbed over concerns of further acceleration in global inflation that kept investors appetite at bay. The greenback was supported by the demand for safe havens. In the Eurozone, the common currency remained weak as data showed that inflation hit a record high in May.
Outlook of the shilling as seen from a relative strength index perspective indicates that the bearishness of the unit may be far from over.
May 27 – June 3, 2022: Weekly financial markets review and outlook with Stephen Kaboyo
Stephen Kaboyo, Founder and Managing Director Alpha Capital Partners