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Uganda shilling edges up against dollar

By Vision Reporter

Added 28th November 2011 09:02 PM

KAMPALA,-The Ugandan shilling has climbed slightly against the dollar, lifted by expectations of dollar inflows from offshore investors purchasing government debt at an auction on Wednesday where yields are expected to rise.

Uganda shilling edges up against dollar

KAMPALA,-The Ugandan shilling has climbed slightly against the dollar, lifted by expectations of dollar inflows from offshore investors purchasing government debt at an auction on Wednesday where yields are expected to rise.

KAMPALA,-The Ugandan shilling has climbed slightly against the dollar, lifted by expectations of dollar inflows from offshore investors purchasing government debt at an auction on Wednesday where yields are expected to rise. 
 
Traders predicted further gains for the local currency ahead of Wednesday's release of November inflation figures, saying a rise in inflation would put pressure on the central bank to increase a key lending rate. 
 
At 0805 GMT commercial banks quoted the shilling at 2,580/2,590, marginally stronger than Friday's close of 2,595/2,605. 
 
"Wednesday's auction is relatively big and foreign investors have shown huge interest in all recent auctions," said Ahmed Kalule, Treasury dealer at Bank of Africa. 
 
Bank of Uganda (BoU) is scheduled to auction 120 billion shillings ($46 million) worth of 91-, 182-, and 364-day debt notes on Wednesday and yields are expected to rise reflecting the bank's tight monetary policy stance. 
 
At the last auction on Nov. 16, the yield on the 91-day paper rose to 22.2 percent from 21.2 percent at the previous auction. 
 
"The market is speculating that we'll have a jump in dollar supplies this week which explains their scaling back of dollar positions," Kalule said. 
 
Four straight increases of the benchmark Central Bank Rate (CBR) since July have helped the shilling recover 12.2 percent of its value against the dollar since Sep. 23 when it plummeted to its record low of 2,901. 
 
The local currency is however still 9.3 percent down against the U.S. currency in the year to date. Policymakers say they are prepared for further CBR hikes if price pressures persist. 
 
A rise in non-food prices pushed Uganda's headline inflation to 30.5 percent year-on-year in October from 28.3 percent the previous month. 
 
"Rate hikes have so far managed to prop up the shilling but the impact on consumer demand remains weak, so we're likely to see a slight surge in prices this week and further policy pressure on BoU," said a trader from a leading commercial bank. 
 
Stanbic Bank said in a market report that the shilling was likely to be stable against the dollar with a possibility of a slight appreciation backed by dollar inflows from charities. 
 
 
 

Uganda shilling edges up against dollar

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