The Uganda shilling experienced a volatile but relatively stable week against the dollar, opening Monday at 3770 / 3780 and closing the week marginally weaker at 3775 / 3785, according to Absa Bank Uganda’s weekly market report.
According to the report, the local currency initially depreciated to 3780 / 3790 amid sustained interbank and corporate dollar demand, before recovering strongly on Tuesday as demand eased and month-end foreign currency inflows from remittances and NGOs improved market supply.
However Renewed corporate demand mid-week caused modest weakness , while strong interbank demand pushed the shilling to an intraday low of 3780 / 3790 on Thursday. However, robust commodity-sector inflows supported a late-session recovery, allowing the currency to end the week only slightly softer.
Absa Bank Uganda’s Ag. Head of Trading Richard Nsubuga says the shilling is expected to remain broadly stable but may face mild depreciation pressure if corporate, interbank and energy-sector demand for hard currency remains elevated. Nevertheless, continued commodity export receipts and remittance earnings should provide an important buffer and help limit significant weakness. In the near term, the currency is expected to trade within the 3750–3820 range against the US dollar, with depreciation pressure from a stronger dollar as the middle east conflict continues to escalate.
Money market liquidity remained ample throughout the week, supported by maturities through the week with approximately UGX 2,725 billion injected into the banking system. Consequently, overnight, and one-week interbank funding rates remained stable at averages of 9.75% and 9.90%, respectively, reflecting comfortable funding conditions across the market. The Bank of Uganda intermittently intervened to manage the excess liquidity, absorbing UGX 231 billion through a two-day mop-up operation on Tuesday and conducting further weekly Open Market Operations on Thursday.
The Central Bank held a Treasury bill auction mid-week where yields on the 91-day and 182-day papers declined by 25.3 basis points and 25 basis points to 9.749% and 9.999%, respectively, while the 364-day yield remained unchanged at 10.999%. Overall, liquidity remained more than adequate to meet market funding requirements, supporting smooth interbank activity, stable short-term lending rates, and downward pressure on shorter-term Treasury bill yields.
The Kenya Shilling remained broadly stable throughout the week, trading within a narrow range and anchored around the 129.45–129.50 level. Month-end hard-currency supply from corporates converting funds to meet local-currency obligations, together with steady remittance inflows, largely matched corporate dollar demand. Although inflows were relatively muted at midweek and buyers showed interest around 129.50, improved interbank liquidity and larger transaction sizes helped keep the pair well supported and prevented any significant directional movement.
Looking ahead, the shilling is expected to remain range-bound around 129.35–129.75, supported by balanced market flows and the possibility of Central Bank intervention should sustained pressure on the Kenyan shilling emerge. However, geopolitical uncertainty and a potential increase in corporate dollar demand could push the pair marginally higher. Kenya’s foreign-exchange reserves declined by USD 221 million week on week to USD 14.934 billion, equivalent to approximately 6.2 months of import cover, but remained sufficient to provide a meaningful buffer against short-term external pressures.
