The Uganda shilling surrendered the gains recorded in the previous session, depreciating sharply against the US dollar as it moved from 3960 / 3970 at the open to close at 4045 / 4055, according to Thursday Absa Bank Uganda market report.
According to the report, the reversal was primarily driven by strong hard currency demand from corporates, interbank and offshore players, which outweighed the limited dollar supply in the market. Demand pressures persisted throughout the session despite the Bank of Uganda’s intervention through dollar sales done yesterday.
Liquidity conditions remained constrained following the yesterday’s CBR rate hike from 9.75% to 12.00%, with market participants continuing to adjust to the tighter monetary environment.
As a result, funding pressures persisted in the interbank market, pushing overnight funding rates higher to average at 11.63%. The tight liquidity backdrop is expected to keep short-term interest rates elevated in the interbank market.
