Shilling stable, seen strengthened by offshore investors

KAMPALA - The Ugandan shilling was stable on Wednesday but was seen likely to strengthen helped by foreign investors buying government Treasury bills at auctions.

Commercial banks quoted the shilling at 2,520/2,525, unchanged from Tuesday's close.

"We're expecting offshore players who participated in the auction to be doing conversions tomorrow (Thursday) to settle their bids," said Ahmed Kalule, trader at Bank of Africa.

"That, added to the fact that we have another Treasury auction next week, will keep the shilling tending toward the upper (stronger) side."

A Treasury bill auction on Wednesday was heavily oversubscribed, central bank data showed, bringing down yields on the benchmark 91-day paper although yields on the 182- and 364-day tenors climbed.

Analysts say this may reflect the central bank's role in determining yields depending on how much it wants to raise and what signals it wants to give the market.

"The appetite for the 182- and 364-day notes was strong and there was a healthy offshore component in there," said Kalule.

Next week Bank of Uganda (BoU) is also to due sell a 3-year bond and a maiden 15-year bond worth a combined 160 billion Ugandan shillings. Traders anticipate strong offshore appetite especially for the long-term paper.

Traders see the shilling between 2,500-2,600 to the dollar over the rest of the year.

Reuters