Exchange rates: Shilling depreciates consistently

For 12 months now, the shillings has persistently become volatile.

The Uganda shilling kept a weak tone and touched a 12 month low to trade above the key psychological level of 3600 at the end of the week.

On Friday, commercial banks quoted the shilling at 3,588/3,598 during the first trading session buying and selling respectively.  This is weaker than Thursday's close of 3,575/85.  

Stephen Kaboyo, Alpha Partners boss said the unit has been on a consistent losing streak undermined by a surge in dollar demand from mainly portfolio investors cutting positions in the fixed income space.

 
"As depreciation pressures increased, Bank of Uganda (BoU) suspended its daily dollar purchases," Kaboyo stated.

In the international markets, Kaboyo said the dollar was bullish supported by the Federal Reserve comments that there is a likelihood of an interest rate hike by end of year.

The British sterling also traded strong on the back of robust retail data.

He added: "Outlook for the shilling indicate that the shilling will continue to slide as demand remains elevated, with no game changer expected in the short term."

Shakira Nakiranda from Hotel Africana Forex Bureau in Kampala said that the dollar has been rising since the week began.

"I cannot explain the reason for the rise in the dollar," Nakiranda said.

However she attributed it to the low demand thereby creating more chances for the exchange rate to rise.

Nakiranda added: "it seems the shilling is depreciating."