Shilling slides further as dollar demand surges, global tensions bite
The Uganda shilling has continued its losing streak, weakening to 3775/3785 against the US dollar this week, down from 3750/3760 at the start of last week, as demand for hard currency tightened its grip on the market. Traders say the pressure came mainly from heavy dollar demand by corporates in the manufacturing, energy and telecom […] The post Shilling slides further as dollar demand surges, global tensions bite appeared first on Daily Star.
Black News 
The Uganda shilling has continued its losing streak, weakening to 3775/3785 against the US dollar this week, down from 3750/3760 at the start of last week, as demand for hard currency tightened its grip on the market.
Traders say the pressure came mainly from heavy dollar demand by corporates in the manufacturing, energy and telecom sectors, alongside offshore investors scrambling for greenbacks.
Dollar inflows from exporters, remittance firms and a few corporates failed to match the appetite, leaving the local unit exposed. So far this year, the shilling has lost about 4.1% of its value, largely due to global uncertainty driven by tensions in the Middle East.
Market players now expect the currency to trade within the 3680–3800 range in the near term as external risks remain elevated.
Richard Nsubuga, Acting Head of Trading at Absa Bank Uganda, said money markets remained relatively stable despite the currency pressure, supported by liquidity from government coupon payments.
Overnight and one-week lending rates averaged 9.98% and 10.58%, respectively.
Meanwhile, yields at this week’s Treasury Bill auction dipped across all tenors after the government accepted only 74% of the offered amount, signalling a reduced appetite for domestic borrowing.
The 91-day, 182-day and 364-day papers cleared at 10.5%, 11.001% and 12.0%, respectively.
Despite expectations of rising inflation, analysts say yields could remain subdued in the short term as the financial year winds down.
Across the border, the Kenyan shilling also came under pressure, trading between 129.50 and 129.90 against the dollar, weighed down by renewed corporate demand, particularly from the energy and manufacturing sectors.
Globally, the dollar strengthened, with the dollar index hitting 99.4, its highest level since April, as fears over the Iran conflict pushed oil prices higher and raised fresh inflation concerns.
Reports indicate Iran has taken a tougher stance in negotiations with the United States, refusing to ship out its near-weapons-grade uranium—casting doubt over hopes for a quick resolution.
At the same time, minutes from the US Federal Reserve suggest policymakers may still consider further interest rate hikes if inflation remains stubbornly high, although markets largely expect rates to hold steady this year.
In Europe, the euro slipped to around $1.16 after weak economic data showed the eurozone economy unexpectedly contracted in May, hit by rising costs linked to global tensions.
The British pound also hovered at $1.343 after data revealed the UK economy shrank, ending a year-long growth streak.
Oil prices showed signs of volatility, briefly falling on optimism around US-Iran talks before rebounding to about $97.70 per barrel.
Gold prices also edged lower amid shifting investor sentiment around the same geopolitical tensions.
With global markets on edge and dollar demand still strong, analysts warn the pressure on regional currencies—including the Uganda shilling—is far from over.
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