12 November 2012

Uganda: Shilling Under Pressure

The Uganda shilling came under pressure against the US Dollar trading 2600/10 on Friday [Nov. 9] having opened the week at 2575/85.

Forex dealers said the market saw aggressive bids by interbank players covering sizeable corporate demand leading to the drop.

Denis Mashanyu, forex trader at Standard Chartered Bank said the debt market was relatively quiet with a slight move of 20 basis points seen in the two year paper auctioned by the Central Bank midweek coming in at 13.5% from 13.3%.

Mashanyu expects the shilling to remain on the back foot in the coming week with the downside supported at 2580 and topside coming 2625 from the technical analysis.

"Rates are expected to remain unchanged with yields in the primary auction likely to stay flat," he said.

According to Bank of Uganda's monetary policy report for November, the exchange rate depreciated by 2.5% (month-on-month) but appreciated by 8.1% (year-on-year) to an average of Shs2, 579 per US dollar.

The report says the depreciation was due to the pickup in demand from offshore players, the oil and manufacturing sectors.

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