Uganda’s shilling fell 2.2% against the dollar touching 2670/80 in the week ending Nov. 23 from the previous close of 2605/15.
The central bank intervened in the early morning session on Friday-Nov. 23 to halt the slide as demand for dollar surged.
This month Bank of Uganda (BoU) cut its key lending rate by 50 basis points to 12.5% from October’s 13%, slowing down the rate of its policy easing, a move analysts say might offer the shilling support in the medium term.
Forex experts have expressed worries about the continued depreciation of the Uganda shilling against foreign currencies especially the US dollar, saying that would lead to a spike in the cost of doing business and slowdown economic growth.
Denis Mashanyu, the forex trader at Standard Chartered Bank said the market saw significant demand with banks aggressively bidding with no offers.
“Interest rates continued to hold steady with no changes and yields were equally flat in a quiet debt market,” Mashanyu said, adding next week we expect the shilling to remain weak with 2700 in sight on the topside and the downside risk limited to central bank interventions.
“We expect yields on treasuries to hold in the current levels as central bank issues 91 day, 182day and 365day papers midweek,” he said.
Market analysts say the country needs to strengthen its exports so that they much with the imports if the local unit is to remain strong.
Uganda imports mainly from India, China, Kenya, Japan and the United Arab Emirates, accounting for 61.6% of all imports.