By Richard Nsubuga- Ag Head of Trading, CIB Markets, Absa Bank Uganda
The local currency remained under pressure during the week, weighed down by sustained dollar demand from corporates, local banks, and select offshore players. As a result, the shilling weakened to trade around 3715 / 3725 on Friday, compared with last week’s close of 3695 / 3705.
Dollar inflows from commodity exporters and remittance firms proved insufficient to offset the elevated buying pressure. Looking ahead, the shilling is expected to trade within a wide 3650–3800 range, reflecting continued external uncertainty.
Money market conditions were relatively tight throughout the week. Overnight and one-week money market rates averaged 10.62% and 10.79%, respectively. At the Treasury bill auction, the 91-day paper cleared unchanged at 10.002%, while yields on the 182-day and 364‑day tenors eased to 10.75% and 12.00%, respectively. The central bank accepted a total of UGX 243 billion. There are no Treasury bill auctions scheduled for the week commencing 27 April.
“In the region, the Kenya shilling remained broadly stable over the past week, trading within the 129.00 / 129.25 range. However, it was intermittently vulnerable to pressure from pockets of dollar demand, while steady remittance inflows helped limit further weakness. In the near term, the currency is expected to trade within a 128.90–129.50 range”
Oil prices rose during the week as concerns mounted over a lack of progress in de‑escalation efforts between the US and Iran, effectively keeping the Strait of Hormuz closed. Brent crude 0.4% to trade above $105.50 per barrel, after earlier rising by as much as 1.9%.
The commodity is on course for its largest weekly gain since the first week of the conflict, as the closure of the Strait continues to disrupt oil flows from the Middle East. Tensions in the region have heightened fears over energy supply, with both the US and Iran reportedly seizing vessels while naval blockades maintained the shutdown of the Strait of Hormuz.
Prior to the conflict, approximately 20 million barrels of oil and petroleum products transited the strait daily, underscoring its importance as a global energy chokepoint. Prices rose despite comments from US President Donald Trump on Thursday indicating that Israel and Lebanon had agreed to extend their ceasefire following talks at the White House.
The dollar index hovered around 98.8 on Friday and was on track to register its first weekly gain in three weeks, supported by safe‑haven demand amid stalled US‑Iran peace negotiations. The Federal Reserve is widely expected to keep the federal funds rate unchanged at next week’s meeting and for much of the year, as policymakers continue to assess the inflationary and growth implications of the Iran conflict.
Markets have also drawn reassurance from recent remarks by Fed nominee Kevin Warsh, who reiterated his commitment to maintaining central bank independence.
Gold prices traded below $4,700 per ounce on Friday and were on course to decline by around 3% for the week. Rising energy prices and heightened inflation concerns, driven by escalating tensions around the Strait of Hormuz, weighed on the precious metal.
In currency markets, the euro weakened to below $1.17, its lowest level in two weeks, as geopolitical tensions persisted and diplomatic efforts showed little progress. The British pound recovered from earlier losses to stabilize around $1.35 against the US dollar, though it remains at its weakest level since 10 April.
While April’s PMI data showed a rebound in UK business activity following March’s conflict‑related slowdown, the improvement partly reflected firms stockpiling inputs amid fears of future price increases and supply disruptions.
