By Steven Odeu and Macrines Nyapendi
THE shilling has strengthened further against major foreign currencies.
The local foreign exchange market opened business yesterday with the local unit trading at 1895/1910 for buying and selling respectively against the US dollar in major forex bureaux in Kampala. This is the shillingâ€™s highest trading rate against the dollar in 11 months.
The last time the shilling traded at this level against the greenback was in February 2003, when it was just beginning to loose ground against major foreign currencies including the pound and the euro.
Tumusiime Mutebile, the Governor Bank of Uganda (BOU), early this month said the central bank would maintain careful fiscal, monetary and financial policies to deliver a relatively stable foreign exchange rate.
The strengthening of the shilling has prompted some analysts to suggest the BOU was deliberately trying to encourage exports, as a stronger shilling would benefit exporters and discourage imports. A weaker shilling would do the opposite.
Yesterday, the shilling was trading at 3450/3470 from 3550/3650 for buying and selling respectively against the pound, mid this month.
Against the euro, the shilling was trading at 2350/2450 from 2500/2600 for buying and selling respectively over the same period. Regional currencies like the Kenya and Tanzania shilling also dropped against the local unit.
Dealers attributed the strength to a â€œcompletely no demandâ€ for the dollar and other foreign currencies amid huge inflows from NGOs and offshore players.
â€œThere is actually no demand for any foreign currency in the market. That is why they are all coming down,â€ a manager at Lloyds Forex Bureau said yesterday.
Citibank treasury officials said healthy secondary market inflows from the export sector and NGOs continued to come in, further rendering support to the already strong shilling.