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Uganda Shilling Weakens Further
3 Jan 2017, 15:39 Comments181 Views Kampala, UgandaBusiness and finance ReportIn short
Stephen Kaboyo from money market watchers Alpha Capital Partners attributes the weakening of the Shilling to weaker than expected foreign exchange inflows, especially from the Ugandan diaspora.
The Uganda Shilling has lost ground to the US Dollar as the New Year sets in.
The Shilling is trading at an average of 3609/3629 against the Dollar, which is about 500 Shillings from the pre-Christmas rate.
Before Christmas, the Shilling traded against the dollar in the range of 3580/3590. Major Forex Bureaus in central Kampala are posting over 3600 on the buy side on their counters.
The Bank of Uganda, whose exchange rates determine the market rates, has the Dollar buying at 3,604 and selling at 3.614 today.
Stephen Kaboyo from money market watchers Alpha Capital Partners attributes the weakening of the Shilling to weaker than expected foreign exchange inflows, especially from the Ugandan diaspora.
The Ugandan diaspora annually remit about one billion US Dollars, making their remittances the biggest foreign exchange inflow in Uganda. According to Kaboyo, seasonal inflows from Ugandans living abroad fell short of expectation.
Kaboyo adds that there has also been an increase in demand for the Dollar from importers and commercial banks, adding that commercial banks have been covering short positions, hence the depreciation.
On the near term outlook, Kaboyo says the Shilling will most likely remain weak as businesses resume operations after the holidays.
Kaboyo says in the international currency markets, the US Dollar has continued its bullish rally against major currencies mainly on expectation of higher US economic growth.
In the government securities market, Bank of Uganda issued 3-year and 15-year bonds with a total amount of 160 billion Shillings, with interest rates of 16.375% and 17.000% respectively. There was an over subscriptions on both counters.
Another factor that could have affected the availability of Dollars is decline in foreign direct investments from 950 million dollars in 2014/15 to about 750 million dollars in 2015/16 on account of delays in issuance of oil production licenses.
The Shilling is trading at an average of 3609/3629 against the Dollar, which is about 500 Shillings from the pre-Christmas rate.
Before Christmas, the Shilling traded against the dollar in the range of 3580/3590. Major Forex Bureaus in central Kampala are posting over 3600 on the buy side on their counters.
The Bank of Uganda, whose exchange rates determine the market rates, has the Dollar buying at 3,604 and selling at 3.614 today.
Stephen Kaboyo from money market watchers Alpha Capital Partners attributes the weakening of the Shilling to weaker than expected foreign exchange inflows, especially from the Ugandan diaspora.
The Ugandan diaspora annually remit about one billion US Dollars, making their remittances the biggest foreign exchange inflow in Uganda. According to Kaboyo, seasonal inflows from Ugandans living abroad fell short of expectation.
Kaboyo adds that there has also been an increase in demand for the Dollar from importers and commercial banks, adding that commercial banks have been covering short positions, hence the depreciation.
On the near term outlook, Kaboyo says the Shilling will most likely remain weak as businesses resume operations after the holidays.
Kaboyo says in the international currency markets, the US Dollar has continued its bullish rally against major currencies mainly on expectation of higher US economic growth.
In the government securities market, Bank of Uganda issued 3-year and 15-year bonds with a total amount of 160 billion Shillings, with interest rates of 16.375% and 17.000% respectively. There was an over subscriptions on both counters.
Another factor that could have affected the availability of Dollars is decline in foreign direct investments from 950 million dollars in 2014/15 to about 750 million dollars in 2015/16 on account of delays in issuance of oil production licenses.
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