Shilling firms on banks' dollar sell-off, more gains seen

Jul 24, 2013

The Ugandan shilling gained slightly on Wednesday, helped by a sell-off of dollars on the interbank market and traders said they expected further gains.Commercial banks quoted the currency of Africa's top coffee exporter at 2,575/2,585, stronger than Tuesday's close of 2,580/2,590, after touching

KAMPALA - The Ugandan shilling gained slightly on Wednesday, helped by a sell-off of dollars on the interbank market and traders said they expected further gains.

Commercial banks quoted the currency of Africa's top coffee exporter at 2,575/2,585, stronger than Tuesday's close of 2,580/2,590, after touching 2,570/2,580 earlier in the session.

"Some players are low on shillings and also demand for dollars isn't really there so there was some selling in the interbank which buoyed the shilling," said Shahzad Kamaluddin, trader at Crane Bank.

"And I think we're likely to see more players reducing their dollar holdings because of low demand so the outlook favours more shilling gains."

The shilling has strengthened 4.2 percent in the year to date.

Traders say demand for the hard currency has weakened on the back of delayed salary payments to government workers which in turn depressed consumer spending and slowed import shipments.

A cautious monetary policy stance by the central bank this year has also kept consumer spending under check, and suppressed appetite for dollars.

This month Bank of Uganda left its benchmark Central Bank Rate (CBR) unchanged at 11 percent from June, citing likely upward pressure on inflation from high food costs.

"I doubt we'll break the 2,570-2,590 range the market has traded in recently because I see no major game-changing factor on the horizon," said a trader at a leading commercial bank.

"But poor demand overall will keep the shilling biased on the stronger side."

Reuters

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