Uganda shilling in new 12-month high
Oct 17, 2009
THE shilling traded below the 1,900-level per dollar on Thursday, touching the 1,893-mark, the highest this year, dealers said over the weekend.
By Sylvia Juuko
THE shilling traded below the 1,900-level per dollar on Thursday, touching the 1,893-mark, the highest this year, dealers said over the weekend.
The dealers explained that the shilling was 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.
This prompted 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, but by close of trading on Thursday, the rates had gone back to 1,890/1,905.
The local unit closed Friday’s trading at 1,890/1,895 to the dollar compared to 1,905/1,910 the previous week.
“The strong shilling is attributed to a lot of offshore investors looking for better yields especially on government paper plus a slowdown in demand for the greenback,†said Denis Mushabe, a foreign exchange trader at Standard Chartered Bank.
“This week, I expect the shilling to continue to strengthen and comfortably settle below 1,900, though the market expects the central bank to intervene frequently to take out the excess dollar liquidity,†Mushabe.
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 bond last week, attracting considerable interest from offshore investors.
Another auction worth sh55b is scheduled for October 21.
Globally, the dollar also fell to a fresh 14-month low against a basket of major currencies last week. Dealers expected the shilling to trade within 1,860-1,910 range during the week.
Analysts argued that while a strong shilling favours importers, exporters were hurting because for every dollar earned, they will be getting fewer shillings.
Traders said the market was characterised by low dollar demand from the corporate sector and importers, which gave support to the local unit.
The local unit crossed a historic low against the dollar of 2,300 in May as offshore investors exited the market.
The shilling slide, which began in the fourth quarter of last year, was precipitated by dollar purchase by offshore investors who chose to liquidate their holdings in government securities as credit dried up due to the global economic recession.
Central bank figures show that last year offshore investors repatriated over $300m (over sh600b) from the market at the height of the crisis.
THE shilling traded below the 1,900-level per dollar on Thursday, touching the 1,893-mark, the highest this year, dealers said over the weekend.
The dealers explained that the shilling was 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.
This prompted 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, but by close of trading on Thursday, the rates had gone back to 1,890/1,905.
The local unit closed Friday’s trading at 1,890/1,895 to the dollar compared to 1,905/1,910 the previous week.
“The strong shilling is attributed to a lot of offshore investors looking for better yields especially on government paper plus a slowdown in demand for the greenback,†said Denis Mushabe, a foreign exchange trader at Standard Chartered Bank.
“This week, I expect the shilling to continue to strengthen and comfortably settle below 1,900, though the market expects the central bank to intervene frequently to take out the excess dollar liquidity,†Mushabe.
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 bond last week, attracting considerable interest from offshore investors.
Another auction worth sh55b is scheduled for October 21.
Globally, the dollar also fell to a fresh 14-month low against a basket of major currencies last week. Dealers expected the shilling to trade within 1,860-1,910 range during the week.
Analysts argued that while a strong shilling favours importers, exporters were hurting because for every dollar earned, they will be getting fewer shillings.
Traders said the market was characterised by low dollar demand from the corporate sector and importers, which gave support to the local unit.
The local unit crossed a historic low against the dollar of 2,300 in May as offshore investors exited the market.
The shilling slide, which began in the fourth quarter of last year, was precipitated by dollar purchase by offshore investors who chose to liquidate their holdings in government securities as credit dried up due to the global economic recession.
Central bank figures show that last year offshore investors repatriated over $300m (over sh600b) from the market at the height of the crisis.