Kenyan, Ugandan currencies under pressure amid dollar surge & unrest

Uganda's President Yoweri Museveni has issued a warning to citizens amidst planned protests, emphasizing that they are 'playing with fire'. The Ugandan shilling experienced a slight weakening on Tuesday as the protests commenced, but saw a rebound on Wednesday, with a 0.69 per cent increase to UGX 3,720. This fluctuation has been attributed to the demand for dollars from merchandise importers and commercial banks. On the other hand, the Kenyan shilling has hit an eight-week low against the US dollar, influenced by ongoing protests. To further analyze the impact of these protests on the market, CNBC Africa interviewed Chad Nyakatura, the Money Market Sales Manager at Stanbic Bank Uganda. Chad discussed the recent protests in Uganda, stating that the planned march to parliament aimed to address alleged corruption within the country. While the police reported about 20 arrests, there have been no reports of violence to date. He highlighted the government's efforts in combating corruption, noting that the Head of State House Investor Protection Unit saved over $300 million in the fight against corruption. Despite these challenges, the situation in Kampala appears calm, with business proceeding as usual. Chad expressed optimism about foreign direct investments, citing recent developments such as the French Chamber of Commerce investing over $4 billion in Uganda. He believes that the country's attractiveness for foreign investments remains intact, especially in sectors like oil and gas. Regarding currency stability and inflation, Chad emphasized that the Ugandan shilling has been relatively stable and one of the best-performing currencies in the region. With headline inflation around 3.9 per cent, the Central Bank is expected to maintain the Central Bank rate to address any inflationary pressures. Meanwhile, in Kenya, the protests have influenced the Kenyan shilling's performance, leading to an eight-week low against the US dollar. Importer demand and foreign investors' actions have contributed to the shilling's pressure, but Chad highlighted that the currency has remained resilient, with adequate FX liquidity to meet the demand. When discussing business continuity and risk management amidst political unrest and currency fluctuations, Chad advised businesses to stay informed and consider hedging strategies to mitigate currency risks. He mentioned that Standard Bank Uganda offers support in hedging against adverse currency movements. Looking at the regional perspective, Chad pointed out that inflation and currency fluctuations have been significant concerns. He underscored the importance of stability in Kenya for fostering regional trade and highlighted sectors like agriculture as key drivers of economic performance in the region. In conclusion, while Uganda and Kenya face challenges with their currencies amid protests and a surge in the US dollar, the resilience of their economies and ongoing efforts to attract foreign investments provide a glimmer of hope for sustained economic growth despite the current uncertainties in the market.