KAMPALA-The Ugandan shilling edged lower against the dollar on Tuesday due to some interbank demand for the US currency, but dealers expected it to remain stable.

Commercial banks posted the local unit at 1,865/1,870 against the greenback from Monday's close of 1,861/1,866.

Dealers expect the local unit to trade within a 1,860-1,880 range in the coming days.

“The market is still quiet, though we have seen the local unit shed some gains. But we still think the rates will hold within these levels for some time,” Denis Mushabe Mashanyu, a trader with Standard Chartered Bank Uganda.

Other dealers said the local unit may come under pressure with more demand anticipated from corporate players.

“If dollar demand persists coupled with the effect of a strong dollar globally, it may put the shilling under some pressure,” said a dealer with a commercial bank.

The shilling traded below the 1,900-level per dollar in October, touching the 1,893-mark, the highest this year, boosted by the offshore interest in government securities and the low demand for the US currency.

The shilling last traded around these levels in October last year, prompting the central bank to intervene on the buying side to smoothen out volatility in the market.

This action pushed the rates to 1,900/1,910 per dollar, before going back to 1,890/1,905. Central bank said offshore investors had returned to the market as the global economy showed signs of recovery.

Bank of Uganda auctioned a sh60b two-year Treasury in October, where it attraced considerable interest from offshore investors.

Globally, the dollar also fell to a fresh 14-month low in October againstmajor currencies. While a strong shilling favours importers, exporters were hurting.

Reuters
because for every dollar earned, they will be getting fewer shillings.

Dealers expected the shilling to trade within 1,860-1,910 range during the week.