The Uganda shilling traded under pressure during the week driven by sustained corporate demand amid weaker dollar inflows, according to Absa Bank Weekly Market Report. Dollar supply from entities paying end of Financial Year taxes wasn’t sufficient to offer support to the local unit. Additionally, offshore investor appetite for the foreign currency remained elevated amid global dollar strength. On Friday morning, the dollar-shilling currency pair was seen quoted at 3690 / 3700 levels weaker than last week’s close of 3640 / 3650. The shilling is still projected to trade within a wider range of 3600–3720 in the near term.
Money markets were liquid throughout the week prompting the Central Bank to conduct an Open Market Operations on Thursday through the 7-day mop up repo. Overnight rates averaged 9.62% during week, reflecting elevated liquidity levels in the system.
The USD/KES pair was stable during the week trading within 129.20 – 129.80 range in a session dominated by balanced liquidity and subdued activity towards end of the week as several businesses remained closed with protestors commemorating the second anniversary of the 2024 GenZ riot victims. In the near term, the Kenya shilling is expected to trade within the 129.20–129.90 range as month end flows come into play.
Brent crude fell below $74 per barrel, while WTI slipped under $71 on Friday, erasing some of earlier gains within the week as investors balanced rising shipping activity through the Strait of Hormuz with renewed security concerns. A vessel strike near Oman intensified fears of increased Iranian influence over the vital route, prompting some ships to turn back and casting doubt on progress in U.S.–Iran peace efforts. Although negotiations continue, they remain slow and complex. Despite the tensions, oil flows through Hormuz have reached their fastest pace since the conflict began. Meanwhile, Middle Eastern producers are ramping up output, though tanker shortages persist. Overall, markets remain cautious amid ongoing geopolitical risks and a fragile recovery in shipping activity.
The dollar index steadied around 101.5 on Friday after coming under pressure on Thursday but remained on track for a weekly gain, as markets continued to anticipate a Federal Reserve rate hike later this year. The greenback weakened on Thursday after the latest U.S. PCE inflation report came in largely in line with expectations. While inflation still sits well above the Fed’s 2% target, the data helped ease fears of a sharper-than-expected acceleration in price pressures.
The British pound weakened below $1.32, hovering near its lowest level in seven months, as investors weighed easing political uncertainty against softer UK economic data. Sentiment was supported somewhat by expectations that a prolonged Labour leadership contest may be avoided following Keir Starmer’s resignation. Andy Burnham has since emerged as the leading contender to succeed him, providing a degree of political clarity even as economic concerns continue to weigh on the currency.
The euro slipped to $1.1390, marking its lowest level in 12 months, weighed down by broad-based strength in the US dollar amid expectations that the Federal Reserve will tighten monetary policy later this year following hawkish signals from officials last week.
Gold declined to around $4,000 an ounce on Friday morning, as investors favored the US dollar. Hawkish signals from the Federal Reserve outweighed any support from progress in US–Iran peace efforts.
