Uganda Shilling Hits Lowest Level

The Uganda Shilling last week weakened to the lowest level on record to trade at 2955, breaking the resistance level of 2950 for the first time.

A trader displays Uganda Shilling notes. IMF says there is likelihood of exchange rate depreciation as has already been observed in South Africa, Nigeria, Ghana and Zambia.
A trader displays Uganda Shilling notes.

The shilling challenged the power of Bank of Uganda (BoU) when it slightly recouped some losses but bounced back to trade higher soon after the Thursday intervention.

Analysts say the sharp decline is on account of a seasonal surge in demand ahead of corporate dividend declarations as the interbank positions itself to sell forex, coupled with the normal demand from importers and manufacturers.

BoU purchases for reserve build up have affected the sentiment as well, analysts say.

Fundamentally, Stephen Kaboyo, the Alpha Capital Partners Managing Director says the shilling has been affected by reduced inflows combined with the rising import bill especially on capital goods required for infrastructure projects.

“In light of these trends and the view that there is likely to be limited fiscal and current account consolidation going forward, the obvious outcome would be to project further shilling weakening,” Kaboyo says, adding, “The market is now looking to test the round price level of 3000.”

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