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Dollar in narrow range as focus shifts to Trump’s China response

The local currency shone on Thursday, gaining traction versus the dollar, amid trivial activity.

Despite demand for dollars from the corporate and interbank players, the shilling was propelled to close at the 3775-3785 levels as the market was crammed with end month foreign currency inflows.

Ahead of the weekend, the home unit may hold on to its recently acquired gains and possibly set new ranges.

The dollar was hemmed into a narrow trading range yesterday as traders’ focus shifted to U.S. President Donald Trump’s response to China’s passage of a national security law for Hong Kong.

The greenback was on course for a weekly loss against major currencies as progress in lifting coronavirus lockdowns and stimulus plans in Europe weakened demand for safe havens, but the mood could quickly worsen if Sino-U.S. tensions increase.

The common currency headed for its second weekly gain against the greenback as the EU’s announcement of a 750-billion-euro coronavirus recovery fund fuelled optimism about the euro-zone economy. The euro stood at $1.1073 against the dollar.

Elsewhere, the pound held steady at $1.2317 on course for its second weekly gain, supported by broad selling in the dollar this week.

However, sentiment for the pound has been somewhat negative due to calls for the resignation of an influential aide to British Prime Minister Boris Johnson, lack of progress in EU trade talks, and speculation about negative interest rates.

Dollar holds gains amid fresh U.S.-China tensionsThe local foreign exchange market experienced calm on Thursday with the Uganda shilling trading within a narrow band against the U.S. unit. Paltry dollar inflows just about matched demand for foreign currency from the corporate sector and left the USDUGX currency pair a mere 3 shillings higher by the closing bell. The pair is likely to trade within the latest trading range albeit with a bearish tinge as we anticipate end month activity to gradually pick up on the foreign currency demand counter. The dollar held gains against major currencies as worries about renewed diplomatic tensions between the United States and China supported safe-haven demand for the greenback. Sino-U.S. relations have soured yet again over a broad range of issues, including China’s treatment of the former British colony of Hong Kong and its response to the coronavirus pandemic, which is causing risk aversion to spread.22 May 2020Dollar gains amid markets discontent with European Central BankIncreased dollar demand saw the Uganda shilling edge lower against the U.S. unit on Thursday. The home unit was down 5 shillings, with the USDUGX currency pair closing the day at the upper range of the recently established 3705/3725 farrow, on the back of increased activity on the foreign currency demand counter. We see competing forces taking centre stage in the local FX market, limiting the movement of the local unit against the greenback within familiar ranges. The dollar was the star of the day on Thursday gaining sharply against a basket of currencies following markets discontent with European Central Bank stimulus measures. Introduction of $ 1.5 trillion repo operations by Federal Reserve of New York with $ 500bn 3-month repo operation offered on Thursday further supported dollar strength.13 Mar 2020https://www.busiweek.com/local-currency-edges-lower-on-amplified-dollar-demand/