Uganda Shilling Flat Against the US Dollar 28-May-2012

The Ugandan shilling closed unchanged against the dollar in thin trading on Monday as investors awaited the release of May inflation data for clues on a central bank interest rate decision due on Friday.

"I think players are holding off on taking positions to first see how inflation turns out on Thursday," said Robert Nyehangane, head of treasury at Housing Finance Bank.

"I think the recent downward price trend will continue although the fall will probably be marginal."

At the market close, the shilling traded at 2,475/2,485, unmoved from Friday's close.

Uganda's central bank held interest rates at 21 percent at the beginning of the month and put off any immediate easing, citing jumps in food prices. It did, however, promise it would make a fresh attempt to cut borrowing costs later in 2012.

Year-on-year inflation slowed to 20.3 percent last month from a revised 21.1 percent in March but the bank said rising food costs and oil price uncertainties both posed upside risks.

Some market players said the local currency might see modest support from typical month-end dollar inflows and a Treasury bill auction this week.

Bank of Uganda (BoU) is expected on Wednesday to auction 120 billion shillings ($48.14 million) worth of Treasury bills of all maturities.

"Month end inflows anticipated this week and portfolio flows targeting the auction should provide some support to the shilling," said a market brief from Stanbic Bank.

Hard currency inflows from foreign investors buying up Ugandan government securities help prop the shilling in an economy that lacks a strong export base.

Reuters
28-May-2012