Uganda’s currency closed the week on a stable footing, reflecting strong liquidity conditions and balanced activity in the money market. According to traders, the local unit benefited from healthy foreign exchange inflows and consistent support from both commercial banks and the Bank of Uganda. The shilling has been trading within a narrow range for several sessions, giving investors a sense of predictability after weeks of regional and global currency volatility.
Money markets were especially liquid on Friday. Overnight trades averaged 10.23 percent while one-week positions traded at an average of 10.77 percent. These rates indicate a comfortable interbank environment where banks were able to meet their funding needs without stress. The smooth conditions helped prevent any rapid swings in the shilling’s value and reassured businesses planning for the end of month period.
Several factors contributed to the calm close of the week. Exporters of coffee, fish and gold provided steady inflows of foreign currency, which supported the shilling against external pressure. At the same time, demand for dollars from corporate clients and importers remained modest, reducing downward pressure on the local currency.
Market analysts say this balance is crucial. When demand for dollars aligns with supply, volatility decreases and the shilling can hold stable levels for longer periods. Traders also noted that sentiment in the interbank market improved as liquidity remained abundant. Banks were able to lend and borrow comfortably, helping maintain an orderly trading environment.
The Bank of Uganda’s predictable operations have also strengthened market confidence. By managing liquidity carefully and maintaining a steady stance on monetary policy, the central bank has helped anchor short-term interest rates. This has eased pressure on the money market and contributed to currency stability.
Liquidity is one of the strongest indicators of market health. Throughout the week, Uganda’s money markets remained well supplied, enabling banks to meet their obligations smoothly. Overnight lending, which serves as a key measure of liquidity tightness, showed no signs of strain. The average rate of 10.23 percent reflected a market with adequate cash circulation.
One-week money market rates also pointed to stability. The 10.77 percent average suggested that banks did not face unexpected funding pressures. When the money market functions smoothly, financial institutions can focus on serving clients instead of navigating short-term shocks. This helps businesses, importers and investors plan their transactions with greater certainty.
Traders say that liquidity from government payments, donor disbursements and tax cycles supported banking operations. These inflows provided enough liquidity to meet demand throughout the interbank system.
Importers are typically the biggest drivers of foreign currency demand. When import activity rises sharply, the shilling can weaken. This week, however, importer demand remained measured. Many companies had already settled their mid-month obligations, reducing the urgency for large dollar purchases.
Demand for petroleum products and industrial raw materials remained stable. Although Uganda relies heavily on imported goods, disciplined demand from major sectors helped maintain balance in the forex market. Traders expect importer demand to rise slightly as month-end approaches, but few anticipate sharp volatility as long as inflows remain steady.
Strong export performance is a key factor supporting the shilling. Uganda’s agricultural sector continued generating significant foreign exchange, particularly coffee, which remains the country’s top export. Global coffee prices have been favourable in recent months, boosting inflows to local exporters.
Gold exports and regional re-exports also contributed to steady inflows. With more businesses receiving payments from international buyers, commercial banks were able to supply the market with foreign currency at stable rates. This helped maintain calm conditions even as global markets experienced fluctuations due to interest rate speculation and geopolitical tensions.
The stability of the Uganda shilling also reflects broader regional dynamics. The East African region has experienced mixed currency performance. Kenya’s shilling has shown signs of strengthening after a turbulent year, while Tanzania’s shilling has remained relatively stable. This regional stability reduces speculative pressure on Uganda’s currency.
Globally, the US dollar has remained strong due to expectations around interest rate decisions. Usually, a strong dollar puts pressure on emerging market currencies. However, Uganda’s controlled demand and consistent inflows appear to have cushioned the economy from major external shocks this week.
Analysts warn that global shifts could still influence the local market. Any sudden movement in oil prices, geopolitical tensions or US monetary policy announcements may cause temporary pressure. For now, however, the market seems insulated by healthy liquidity and consistent local flows.
Stable currency conditions play a major role in boosting business confidence. Companies involved in imports, exports and manufacturing rely on predictable forex markets to manage costs and contracts. This week’s performance provided reassurance to traders planning their financial and inventory strategies for the coming weeks.
Investors also view currency stability as a sign of economic resilience. A stable shilling reduces inflationary pressure, supports predictable pricing in the domestic economy and encourages foreign investment. When the currency fluctuates wildly, investors tend to become cautious. Stability, therefore, is an important signal for long-term economic planning.
Market participants expect the shilling to continue trading within a narrow range next week. Liquidity is anticipated to remain comfortable due to expected government payments and continued export receipts. Traders say that unless there is an unexpected surge in corporate demand or a major global shock, the currency should remain stable.
Some analysts warn that month-end dollar obligations may cause temporary increases in demand. However, with strong liquidity and balanced market conditions, the impact is likely to be manageable.
Banks and importers are already planning their month-end strategies, and many believe the current stability will continue to offer a favourable environment for transactions.
The Uganda shilling closed the week stable, supported by strong liquidity, healthy export inflows and predictable monetary operations. With overnight rates averaging 10.23 percent and one-week rates averaging 10.77 percent, the money market remained calm and functional. Businesses and investors can take confidence from these conditions as they prepare for the coming week.
While risks remain in the global environment, Uganda’s financial markets showed resilience and balance. For now, the calm end to the week reflects a well-managed market and a positive tone for the near-term economic outlook.
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