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Local Currency Improves as Oil Price Drops

Despite the trade decline orchestrated by the COVID-19 pandemic, with exports declining from $383.6m in January 2020 to $352.9 in February and Imports declining from $711.9 in January to $701.3 in February and $593.7 in March, according to Amelia Kyambade, the Minister of Trade, Industry and Cooperatives, the local currency has gained noticeably.

Stephen Kaboyo, the Executive Director of Alpha Capital says the trading bond range for the local currency improved when securities exchange opened for its normal daily trading session.

The shillings (Shs) was buying at 3780 and selling at 3790 during this trading week.

According Kaboyo, the open market operations through a deposit auction that was conducted by Bank of Uganda (BOU as part of their liquidity management program supported the currency and kept volatility in the money markets in check.

“At the opening bell, the Ugandan Shillings’ (Shs) was stable, but ceded some ground in the mid-week because of demand which majorly emerged from corporate players,” said Kaboyo

He says the persistent drop in demand for oil negatively affected the US dollar ($), although the Euro and Sterling remained well anchored amid a bounce back in crude oil prices.

WTI crude traded at minus $37.63 per barrel but later bounced back to trade at $20.

“There was upheaval with oil trading in unchartered as the extreme drop in demand combined with inadequate filling storage sent prices plunging into negative for the first time in history,” he said

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According to Kaboyo, on the overall both supply and demand side dynamics will not be significant to change the prevailing price trend line.

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