Uganda shilling extends gains against American dollar

Monday, 4th April, 2011

THE Uganda shilling continued its recent resurgence on Monday, expanding its gains against the dollar and traders said the unit would be strong against the US currency due to lacklustre greenback demand.

Commercial banks in Kampala exchanged the shilling at 2,380/2,385 against the dollar, up from Friday’s close of 2,383/2,388.

“We have weak demand in the market and liquidity (for the shilling) is also tight and these are both energising the

shilling,” said Faisal Bukenya, head of market making at Barclays Bank Uganda.

The local currency has been resilient against the greenback since UK explorer Tullow announced that it had sold two thirds of its exploration properties in Uganda to China’s Cnooc and France’s Total for $2.9b.

Tullow said it will pay the Ugandan government a total $469 million in capital gains tax in the next few days.

“Psychologically the shilling is gaining some confidence from the expected flow of the petrodollars even though the government is unlikely to use them to intervene in market,” Bukenya said.

He forecast the dollar would trade between 2,365/2,385 this week.

“US dollar sell-offs have been witnessed this morning lowering the trading level (strengthening the shilling). This week’s outlook still favours the Uganda shilling,” said a market report from Bank of Africa Uganda.