Shilling strengthens ahead of key BOU rate decision

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The Uganda shilling gained ground on Monday as traders kept to the sidelines ahead of Tuesday’s Monetary Policy Committee (MPC) meeting, where the Bank of Uganda (BOU) is expected to announce its August policy rate decision.

The MPC will meet tomorrow morning (August 12), and the central bank Governor, Michael Atingi-Ego expected to deliver the August Monetary Policy Statement later in the afternoon.

Markets will be watching for any shifts in the policy stance after recent strength in the Uganda shilling against the dollar.

The local unit opened the week at 3560 / 3570 against the dollar and firmed slightly to close at 3555 / 3565, helped by improved dollar selling from commercial banks and commodity exporters.

Traders said the cautious tone in the market was also driven by mid-month tax payments due on Friday, which have tempered dollar demand. Traders now see the shilling edging closer to the 3550-mark, with projections for the currency pair to trade in a revised range of 3525–3600 in the near term.

Money markets were liquid on Monday, according to Absa, with overnight and one-week lending rates averaging 9.78% and 10.20%, respectively.

The central bank has scheduled a treasury bill auction for Wednesday, offering sh355b, while maturities worth sh911.7b in repos and sh359.5b treasury bills are expected on Thursday, the settlement date for this week’s auction.