Uganda Shilling Steady in Subdued Trade

Slow demand for dollars among investors enabled the Ugandan shilling to trend steady on Tuesday.
Slow demand for dollars among investors enabled the Ugandan shilling to trend steady on Tuesday.

The Ugandan shilling was stable on Tuesday in subdued trade as investors pondered the next interest rate move after a fall in inflation, with demand for U.S. dollars also held back by a retailers’ strike with Commercial banks quoted the currency of the third largest economy in the East Africa region at 2,545/2,550, barely changed from Monday’s close of 2,542/2,547.

The Ugandan shilling was steady on Tuesday and was seen trading in a narrow range in the days ahead, supported by slow demand for dollars among investors.

Commercial banks quoted the shilling at 2,545/2,550, barely changed from Monday’s close of 2,542/2,547.

“We saw some appetite for dollars on the interbank which was driven by offshore demand. But this demand is not … likely to push the shilling into (a) major weakening,” said Faisal Bukenya, head of market-making at Barclays Bank.

He said the local currency was likely to oscillate in the 2,545-2,555 range in coming sessions.

Money-market analysts say the central bank’s tight monetary policy stance has stifled consumer spending and kept a lid on the flow of imports.

The shilling has firmed 5.6 percent so far this year, largely underpinned by the conservative policy of the Bank of Uganda, which hiked its policy rate to 12 percent from 11 percent earlier in September, saying it was moving to contain inflationary pressures.

The U.S. Federal Reserve’s surprise decision to maintain its stimulus programmes has also help the local currency post additional gains since the middle of last week.

Traders said, however, importers could increase demand for dollars as they prepare to pay for shipments for year-end holiday shoppers, but weak consumer spending is expected to limit any pressure on the shilling.

“We could see some marginal weakening for the shilling if that demand (for dollars) comes through,” said Robert Mpuuga, a trader at Housing Finance Bank.

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