As a result of global financial markets turbulence and the rush by investors to hold the US dollars, the exchange rate depreciated from an average of Shs3,676.9 per the US dollar in February 2020 to close at Shs3,918.1 on March 24. Photo by Eronie Kamukama The volatile market conditions throughout February and March from around the world sparked a flight to safety and liquidity among investors.
The foreigners who were investing in Emerging Frontier Markets and developing economies opted to sell their investment in the local bonds to invest them in a safe haven in the US. As a result, this led to turbulence in the foreign exchange market in Uganda.
The executive director research Bank of Uganda, Dr Adam Mugume, says as a result of global financial markets turbulence and the rush by investors to hold the US dollars, the exchange rate depreciated from an average of Shs3,676.9 per the US dollar in February 2020 to close at Shs3,918.1 on March 24, a change of Shs240.2 in three weeks.
“Exchange rates in most emerging and frontier economies have similarly been affected. Indeed, the Kenya shilling has depreciated on average by 0.21 per cent on daily basis since the beginning of March 2020, similar to Uganda shilling depreciation rate,” he said.
Dr Mugume added: “The Indian Rupee and South Africa Rand have also depreciated by daily averages of 0.26 per cent and 0.66 per cent, respectively. It is only heavily managed currencies like Tanzanian shilling and Rwanda Franc that seemingly have been stable.”
Not only has the foreign exchange market been hit by Covid-19 leading to turbulences but also the capital markets industry, where there has been a drastic reduction in market activities and total market capitalisation.
Capital markets
Recently, the chief executive officer of Uganda Securities Exchange (USE), Mr Paul Bwiso said: “Following the confirmation of corona (Covid-19) virus in Uganda, the Uganda Securities Exchange (USE) wishes to reassure all investors and the general public that it continues to work jointly with all market players to ensure the safe and orderly conduct of business with the securities market.”
About the current status of the market, Mr Bwiso said: “To date, shares of local companies listed on USE remain relatively stable with movements in Local Shares Index (LCI) remaining at a normal range (-1.62) since the start of the year.”
“On the other hand, the ALL Shares Index (ALSI) has registered a notable drop of […]
