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Ugandan Shilling Hits 18-Year Low, Has Fourth Weekly Drop on Dollar Demand

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Posted August 12, 2011 by Ugandan Diaspora News Team in Economy ~ 2,005 views

     

By Fred Ojambo, BLOOMBERG ~ Uganda’s shilling, the world’s worst-performing currency in the last two months, headed for a fourth week of declines against the dollar after reaching an 18- year low on rising demand for the U.S. currency.

The currency of East Africa’s third-biggest economy depreciated as much as 1.4 percent to 2,817.5 per dollar, the weakest since June 1993, and traded 0.5 percent down at 2,795 by 3:48 p.m. in the capital, Kampala, extending its drop this week to 4.5 percent, according to data compiled by Bloomberg.

“There is general demand for the dollar in the market by importers and multinational companies and yet there is a significant reduction of dollar inflows,” Denis Mashanyu, a currency trader at Standard Chartered Bank of Uganda Ltd., said by phone from Nairobi, the capital of neighboring Kenya.

The shilling has declined because of “negative sentiments in the market” and the failure by the central bank to frequently sell the dollar, he said.

The currency of Africa’s second-biggest coffee producer has fallen 17 percent against the dollar this year, making it the world’s worst-performing currency. A surge in food and fuel prices pushed inflation to a more than 18-year high of 18.7 percent in July from 15.7 percent in June.

Uganda is on the cusp of an oil boom with Tullow Oil Plc, the U.K.-based energy company, expected to start pumping crude and gas from the Lake Albert Basin in 2012. The country has an estimated 2.5 billion barrels of oil, with about 1 billion barrels in proven reserves, according to Tullow.

To contact the reporter on this story: Fred Ojambo in Kampala at fojambo@bloomberg.net


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Ugandan Diaspora News Team

Ugandan Diaspora News Online is an independent, non political news portal primarily aimed at serving Ugandans who work and reside outside Uganda. Our aim is to be a one stop shop for everything Ugandan and the celebration of our Ugandan heritage.

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