East Africa currency watch

The Ugandan shilling has been a focal point in the East African currency market, with traders keeping a close eye on its performance. Despite a slight softening against the dollar, the currency remains within expected trading ranges. Phillip Ssali, Head of Corporate Sales & Global Markets at Standard Bank Group, provided insights into the market developments, shedding light on various factors influencing the currency's movement. Ssali emphasized that the current depreciation is largely expected and manageable, with no immediate concerns or risks seen. He highlighted key factors such as diaspora flows, reduced corporate demand, and increased coffee exports supporting the shilling's stability. Looking ahead, Ssali projected a gradual appreciation of the shilling in line with seasonality factors. In terms of monetary policy, Ssali discussed the recent decisions of the Monetary Policy Committee (MPC) in Uganda, where the central bank maintained the central bank rate at 9.5%. With inflation levels well within the target range, Ssali explained the rationale behind holding the rates steady, citing potential risks and global inflation expectations. The overall outlook on inflation targeting in Uganda was viewed positively, with the central bank demonstrating prudence and sound policy consistency. Shifting focus to the Kenyan market, Ssali addressed the edginess surrounding the Kenyan shilling's performance. He attributed the currency's depreciation to factors such as the removal of fuel subsidies and lingering dollar demand. Despite the challenging dynamics, Ssali reassured that the movement was anticipated and aligned with market expectations. Global dollar strength and horticultural improvements were identified as additional factors influencing the Kenyan currency's trajectory. Discussing the future outlook, Ssali highlighted the importance of confidence in the market to drive currency stabilization. He mentioned the significance of key indicators like the euro bond maturity as signals for the shilling's potential levels. Ssali emphasized the role of supply and demand dynamics in determining the currency's direction, underscoring the market's need for confidence and liquidity for sustainable stability. In conclusion, Ssali addressed the potential impact of reinstating fuel subsidies on currency movements. He emphasized the interplay between demand and incentive structures, noting that supporting dollar inflows could bolster the local unit against potential fluctuations. Overall, Ssali's analysis provided a comprehensive overview of the East African currency landscape, highlighting key drivers and considerations for market participants.