Uganda's central bank notified commercial banks on Sept. 15 that the cash reserve ratio will rise to 13.5% from 11% effective Sept. 24. By forcing banks to park more deposits at the central bank, the move tightens the amount of money sloshing around in the system.
Over the past month, the shilling is down almost 6%, reaching 3,930 per dollar and ranking as the poorest performer among African currencies tracked by Bloomberg. In a Thursday note, Absa Group Ltd.'s Ridle Markus and Phumelele Mbiyo argued the increase in required reserves would withdraw liquidity from the market and steady the shilling.
Markus and Mbiyo wrote, "Heightened tensions in the Middle East and global concerns around oil supply have dampened investor appetite for emerging debt markets such as Ugandan debt." They added, "Such offshore holdings have either been trimmed or covered with FX purchases." Absa also pointed to stronger foreign currency demand from local firms in sectors like telecommunications and manufacturing. Separately, Gerald Paul Kasaato, deputy managing director at Uganda's National Social Security Fund, said many bonds matured this year, which has lifted liquidity in the market.
When currencies wobble, steady strategies help protect and grow your financial future. Join Briefs Finance CEO Jaspreet Singh on September 29th for a FREE live investor workshop, How to Profit From A Dollar That's Losing its Value, where he shows how we're spotting investment opportunities as the dollar falls. Save your spot.
Policy is tightening just as external jitters and corporate FX demand keep pressure on the shilling. That mix can ripple through to assets that are sensitive to currency moves and local liquidity conditions.
Keeping cash plans simple and disciplined gives confidence through any economic season. Our CEO Jaspreet Singh is hosting a FREE live investor workshop, How to Profit From A Dollar That's Losing its Value, on September 29th. Sign up free to join him live.
