Uganda Shilling firms vs US Dollar, seen gaining more

Posted November 12, 2011 by Ugandan Diaspora News Team in Economy ~ 3,678 views


By Elias Biryabarema | Reuters ~ KAMPALA (Reuters) – The Ugandan shilling edged higher against the dollar on Friday as tight shilling liquidity forced banks to unwind dollar positions to ensure their local currency holdings.

Some traders forecast the shilling would strengthen further next week, lifted by dollar inflows from offshore investors purchasing government paper at an auction on Wednesday.
Bank of Uganda (BoU) is due to sell 120 billion shillings worth of Treasury bills of 91-, 182-, and 364-day tenors and analysts hope yields on all the papers will rise on the back of the central bank’s monetary policy tightening stance.

At 1127 GMT, commercial banks quoted the shilling at 2,595/2,605, stronger than Thursday’s close of 2,600/2,610.

“There’s a shilling scarcity in the market and banks were selling their dollars to strengthen their shilling positions,” said Faisal Bukenya, head of market making at Barclays Bank Uganda.

“Next week I anticipate it (shilling) to trade in 2,585-2,635 range but tending to the lower (stronger) side because we expect a surge in inflows from the auction on Wednesday.”

The local currency hit an all-time low of 2,901 against the dollar on September 23, hit by tight dollar supplies, risk aversion to weak, frontier east African currencies and speculation.

Although off its record low, the shilling is still 10 percent weaker than the dollar in the year to date.
A round of monetary policy tightening has, however, seen the shilling gain 11.6 percent against the greenback since then.

“I see the market trading stable around 2,600 since inflows from offshore investors appear balanced by demand from the energy sector,” said a trader from one of the commercial banks.

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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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