Be shrewd, buy small dollar bills

Oct 23, 2009

VASTI Cedeno, a graduate student from the US, travelled to Uganda this year to visit friends and do research for her master’s degree. To avoid high bank charges, she brought the money she planned to use in cash. However, to her misfortune, she carried h

BY REBECCA HARSHBARGER

VASTI Cedeno, a graduate student from the US, travelled to Uganda this year to visit friends and do research for her master’s degree. To avoid high bank charges, she brought the money she planned to use in cash. However, to her misfortune, she carried her money in $20 and $50 bills.

If she had British currency, this would not have been a problem — all sterling notes get the same rate. But since she was using dollars, the forex bureaus gave her rock-bottom prices — about sh1,700 rather than sh2,050. Throughout her trip, she ended up spending about 17% less shillings than she would have if she had traded large bills.

Many visitors to Uganda often wonder why forex bureaus give bad rates for small bills, but give a flat rate for other currencies. Since Uganda’s economy is liberalised, foreign exchange bureau rates respond directly to supply and demand. According to Juma Walusimbi, the communications director for the Bank of Uganda, there is almost no demand for small dollars and some traders refuse to use them. However, the largest sterling note is only £50, and those travelling to UKdo not usually mind using small bills.

“The dollar is the international currency used by traders,” said Walusimbi. “If someone sells a small note, the bureau gets stuck with it. When you go abroad, people prefer big notes.”

“It’s not just Uganda that prefers to trade in large dollar notes — Rwanda and Kenya also give lower rates for small dollars. Many forex bureaus also offer lower rates for bills made before 2003, believing that due to a high level of counterfeiting in the 1990s, only the most recent dollars are safe to trade in. “It’s believed that those made before 2000, especially the ones from 1996, are fake notes,” said Isaac Matovu, who works for Jetset Forex Bureau, near the Kampala Casino.

For shrewd traders wanting to get a better rate, Matovu recommends buying small dollars. Although the bureau offers a lower rate for those selling small dollar denominations, it might be willing to give a good rate to traders who are willing to buy the forex’s small dollars, since most bureaus are eager to get rid of the tiny notes.

Each forex bureau, though, is different. “Normally, no one asks for $200 in singles,” said Matovu. “But if you are a shrewd trader, you can buy singles at a cheaper rate. It is a question of supply and demand.”

If you are a visitor who had the misfortune of bringing small bills, visit several bureaus and talk to different tellers. Some might be willing to bargain with you, especially if you plan to do a lot of trading.

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