The Uganda shilling came under pressure this week against the US dollar, opening stable at 3775/ 3785 as dollar demand from importers and corporates was adequately matched by inflows from exporters and remittance companies.
According to Absa Bank weekly market report, the local unit came under increasing pressure from Tuesday as strong corporate and interbank demand pushed the exchange rate to 3785 / 3795, before further weakening to an intraday low of 3798 / 3808 on Wednesday.
The tail end of the week saw further depreciation as additional demand from offshore participants pushing the shilling to touch 25-year lows of 3870 / 3880 on Friday morning. Overall, the currency has depreciated about 5.8% year to date. Looking ahead, the Shilling is likely to remain under pressure if corporate, importer, interbank and offshore demand for hard currency persists.
Nevertheless, stronger commodity export receipts and remittance could provide some support and help stabilize the currency. In the near term, the shilling is expected to trade wider within the 3750–3900 range against the dollar, with risks remaining tilted toward further depreciation.
Money market remained liquid throughout the week, supported by maturities from the previous week. Overnight funding rates declined progressively from 9.75% on Monday to 8.75% on Thursday, while the one-week rate averaged 9.90%, reflecting increasingly comfortable funding conditions.
The Central Bank was active during the week, conducting Open Market Operations throughout the week. Bank of Uganda also held a Treasury bond auction with the new 3-year and 20-year benchmark bonds cleared at 12.00% and 15.00%, respectively, while the reopened 10-year bond also cleared at 15.00%. The Central Bank accepted a total face value of UGX 620 billion, compared with UGX 990 billion offered across the three tenors.
The Kenya shilling remained broadly stable against the US dollar during the week, with USDKES trading within a tight 129.40/50 range.
Oil has posted its strongest weekly gains since July, with WTI and Brent rising 9.6% and 10.3% respectively, as escalating Middle East tensions fueled concerns over significant supply disruptions.
The rally was driven primarily by intensified Houthi attacks, including strikes on Saudi energy infrastructure and reports of the seizure of Yemen’s strategic Red Sea port of Mocha, alongside continued disruption to oil flows through the Strait of Hormuz. These developments tightened global supply expectations, while strong Chinese crude buying further strengthened physical markets and reinforced bullish sentiment.
The week’s defining move came on Thursday, when Brent surged 6.3% to $107.63 per barrel, its highest settlement since May, while WTI climbed above $102 per barrel, both benchmarks extending a five-session rally.
Although prices eased slightly on Friday as markets awaited US inflation data and assessed the potential impact on Federal Reserve policy, oil remained near multi-month highs. Analysts have turned increasingly bullish, with some forecasting Brent could test $110-$120 per barrel if disruptions in the Persian Gulf persist. The widening Brent-WTI spread also highlighted Brent’s greater sensitivity to Middle East supply risks, reflecting the market’s focus on potential further escalation.
Gold declined 1.5% this week, falling from $4,404.30 per ounce on Monday to $4,337.93 per ounce on Friday, and is on track for its third consecutive weekly loss. Expectations of near-term Federal Reserve rate increases were the main headwind, outweighing safe-haven demand generated by escalating Middle East tensions.
Thursday was the weakest session, with gold dropping 1.8% after hotter-than-expected US producer inflation strengthened the dollar and pushed Treasury yields higher. Gold recovered modestly on Friday as investors awaited US CPI data for further guidance on the Fed’s next decision. Although geopolitical risks, a generally softer dollar, and continued central-bank purchases provided some support, they were insufficient to overcome concerns about higher interest rates and oil-driven inflation.
Both the euro and sterling ended the week marginally softer against the dollar, with EUR/USD down 0.03% to 1.1610 and GBP/USD down 0.05% to 1.3512, masking a week of significant intraday swings driven by competing forces.
The dominant theme was a broad dollar weakening trend through mid-week with the Bloomberg Dollar Spot Index falling to its lowest level since February driven by a yen surge that pressured the greenback, US Treasury buyback operations that disappointed investors expecting a larger increase, and Treasury Secretary Bessent publicly challenging traders on his resolve to support the yen.
Both EUR/USD and GBP/USD rallied to weekly highs on Tuesday and Wednesday, with EUR/USD touching 1.1633 and GBP/USD reaching 1.3547, before the dollar staged a sharp reversal on Thursday following a hotter-than-expected US Producer Price Index print rising in August by the most in three months as energy prices surged. This reignited Fed rate-hike bets ahead of Friday’s CPI release and the September 16 FOMC decision.
