The Ugandan shilling started the week trading at levels of 3680/3690 amidst strong dollar demand, which later pushed the exchange rate to lows of 3707/3717. Demand was initially driven by the Energy sector and later by Manufacturing. Limited dollar supply from remittances and agricultural commodities was insufficient to offset the prevailing demand. With business activity resuming after the end-of-year holiday break, the shilling is expected to face continued pressure, with trading levels projected to range between 3675 and 3730 in the short term.
Rahmah Masagazi, Head of Sales – Global Markets at Absa Bank Uganda, highlighted that money markets remained tight throughout the week, with overnight rates averaging 11.70%. During the week, the Bank of Uganda conducted a Treasury Bond auction, which recorded higher yields for 2-year, 5-year, and 15-year bonds at 16.000%, 16.750%, and 17.500%, respectively, compared to previous rates of 15.750%, 16.000%, and 16.750%. A total of Shs 791.17 billion was accepted in the auction, representing 80% of the amount offered.
The December US jobs report, expected today, is anticipated to show an unemployment rate largely unchanged at 4.2%, with economists forecasting an addition of 165,000 jobs in December, down from 227,000 in November. Masagazi also noted that EUR/USD remained stable near $1.0300 on Friday, marking three consecutive days at this level. The euro has faced downward pressure for four months due to geopolitical risks, a favorable interest rate differential for the US dollar, and President-elect Donald Trump’s stance on new tariffs, which could fuel inflation and influence the Federal Reserve’s interest rate decisions. On Friday, EUR/USD traded at $1.0304 in the early afternoon.
The British pound emerged as the weakest performer among major currencies, losing 0.97% during the week leading to January 10. It reached approximately $1.2239, its lowest level since November 2023, as concerns grew over the UK government’s ability to manage its deficit and rising borrowing costs. GBP/USD was trading at $1.2296.
Gold extended its rally for a fourth consecutive day as traders awaited US payroll figures, which are expected to influence the Federal Reserve’s policy outlook. Spot gold traded at $2,680 an ounce, with investors seeking safe-haven assets amid expectations of moderating job growth and potential trade tensions under the new US administration.
Oil markets positioned themselves for a winter rally, driven by shifting supply flows and strong seasonal demand. Stricter sanctions on Russian and Iranian crude have led refiners in China and India to increase crude purchases from the Middle East and other regions amid concerns over restricted supply access. Brent crude traded around $78 a barrel, marking a 5% rise this month. Oil prices reached a three-month high, supported by a contraction in US crude oil stockpiles.
