Uganda Shilling Weakens Against US Dollar -10-April-2012

10-April-2012

The Uganda shilling lost as much as 0.8 percent on Tuesday on the back of demand for dollars from the energy sector and traders forecast more losses as business picks up after the Easter weekend.

At 0933 GMT commercial banks in Kampala quoted the local
currency 2,490/2,500, weaker than Thursday's close of
2,475/2,485. Local markets were closed on Friday and Monday for Easter.

"We've had (dollar) demand from the energy sector against
very tight inflows and the shilling is taking a hit from that
imbalance," said Ahmed Kalule, trader at Bank of Africa.

The currency of east Africa's third largest economy has
gained on the back of the central bank's decision at the start of the month to pause with any further easing of monetary policy.

Despite a huge drop in inflation, Bank of Uganda decided on
April 2 (BoU) to keep its key lending rate unchanged at 21
percent, backing off further cuts after a sharp dip in the
shilling when it eased policy in March.

Analysts say the pause is expected to keep yields on Ugandan
debt relatively attractive, spur a return of offshore investors and support the local currency.

At an auction last week the rate on the benchmark 91-day
paper edged up to 18.1 percent from 17.4 at the previous sale
although yields on the 182-day and 364-day notes fell slightly.

"We might see the local currency trade range bound this week
with a possibility of a depreciation on expected improved demand for the dollar," said a market brief from Stanbic Bank.

Faisal Bukenya, head of market making at Barclays Bank, said
the shilling would trade in the 2,470-2,500 range this week.

Reuters