The Uganda Shilling extended its depreciation against the Dollar today, weighed down by sustained corporate demand as business activity continues to gather pace at the start of the new fiscal year.
According to Absa Bank Tuesday Market Report, further pressure stemmed from offshore investors actively purchasing the greenback while reducing portions of their holdings in government securities.
A slowdown in foreign currency inflows offered limited support to the local unit, further skewing market dynamics in favour of the greenback. The shilling weakened from opening levels of 3720/3730 to an intraday low of 3745/3755 before recovering part of its losses and eventually settling around 3735/3745.
Liquidity in the interbank market continued to improve following recent government fund releases. Overnight and one-week money traded at average rates of 9.50% and 9.75%, respectively.
Despite the comfortable liquidity conditions, the Bank of Uganda remained on the sidelines, refraining from conducting any liquidity management operations and allowing market forces to determine pricing.
