The Uganda shilling traded firmly against the greenback, but a tad weaker in 2392/2408 range during last week in a market characterized with sizable trades on both counters.
The energy sector dominated the market with their usual tickets while relative inflows from non-governmental organisations helped to tame what could otherwise have been a shilling’s free-fall, Chris Rwengo, the East Africa area head of forex trading at Standard Chartered Bank, noted in a weekly report.
“The Central Bank remained quiet primarily on the fact that the currency pair has been trading side-ways with minimal volatility.
“That being the carrot, the cane becomes effective as there seems to be very little standing on the way for the pair to trade to the higher highs and even whereas 2410 may form the first resistance, in absence of intervention, we could easily visit 2420-30 areas,” the report pointed out on Friday.
“Market players are now starting to feel the need to buy on any dips with one eye focusing on any Central Bank action,” the forex report observed. The shilling reached its lowest levels against the dollar for more than two months on Friday on energy sector demand for the greenback, traders said.
Commercial banks posted the shilling at 2,403/2,408 -- the lowest level the local unit, which is seen as undervalued by the Central Bank -- has reached against the dollar since it was traded for 2,410 on March 23.
“We have seen a bit of demand filtering through from the energy sector and some other corporates,” said Phillip Ssali, the corporate dealer at Standard Chartered Bank Uganda.
The shilling has traded in a tight range for the last month after a period of political unrest, gradually approaching the key psychological 2,400 level to the greenback.
The Bank of Uganda intervened in the market last month, selling dollars to bring the shilling under 2,400 and has historically come into the market at that level.
But traders disclosed that officials at the bank may be holding off as they were expecting capital inflows from as yet unknown sources.
Most of the regional currencies have suffered turbulent trading against the US dollar for better part of this year due in part to the dwindling forex inflows.