The Uganda shilling breached the initial resistance levels as strong interbank activity continued to prevail. According to experts, this continues to be driven by demand out-weighing inflows from the NGO and Commodity exports as well as the negative sentiments from donor aid cuts.
By press time commercial banks quoted the Uganda shilling at Ush2,663 and 2673 buying and selling against the green buck. During the previous week, the huge demand for the dollar by traders who were rushing to stock goods for holiday shoppers as well as offshore investors who were closing their local currency positions ahead of the year were blamed for the weakening of the shilling.
However early last week, analysts had said that the shilling further weaken against the dollar as a result of the offshore investors converting their refunds from the Umeme IPO into hard currency.
Early in the month while announcing the Monetary Policy Statement for November, Bank of Uganda Governor Emmanuel Mutebile had said that the central bank would support the gradual adjustments of the real exchange rate which is necessary to reduce the current account deficit to sustainable levels.
He added that, "BOU will, however continue to intervene to curtail disruptive movements in the exchange rate."
On a similar note the Kenyan unit was stable against the dollar early in the week but traders said that the currency might slip when importers begin making purchases for Christmas.
The unit was quoted at 85.75/75 against the dollar.