Shilling strengthens as banks cut dollar positions

KAMPALA - The Ugandan shilling firmed on Thursday, boosted by banks cutting their dollar positions in the interbank market as demand from importers declined.

At 0741 GMT, commercial banks quoted the currency of Africa's largest coffee exporter at 2,520/2,530, stronger than Wednesday's close of 2,528/2,530.

"Demand from importers is largely absent, which is forcing most banks to cut back on their dollar positions," said Faisal Bukenya, head of market making at Barclays Bank. "I am expecting it (the shilling) to keep an appreciation bias going forward, because I don't anticipate a rebound in corporate demand soon."

The local currency is largely stable in the year to date, underpinned by soft greenback appetite, liquidity mop-ups by the central bank and hard-currency inflows from offshore investors buying into Ugandan debt.

Ahmed Kalule, a trader at Bank of Africa, said the shilling was likely to trade in the 2,510-2,540 range in coming days, supported by inflows from commodity exporters meeting with weak demand.

Reuters