Uganda Shilling Weakens Against US Dollar -10-April-2012
The Uganda shilling lost as much as 0.8 percent on Tuesday on the back of demand for dollars from the energy sector and traders forecast more losses as business picks up after the Easter weekend.
At 0933 GMT commercial banks in Kampala quoted the local currency 2,490/2,500, weaker than Thursday's close of 2,475/2,485. Local markets were closed on Friday and Monday for Easter.
"We've had (dollar) demand from the energy sector against very tight inflows and the shilling is taking a hit from that imbalance," said Ahmed Kalule, trader at Bank of Africa.
The currency of east Africa's third largest economy has gained on the back of the central bank's decision at the start of the month to pause with any further easing of monetary policy.
Despite a huge drop in inflation, Bank of Uganda decided on April 2 (BoU) to keep its key lending rate unchanged at 21 percent, backing off further cuts after a sharp dip in the shilling when it eased policy in March.
Analysts say the pause is expected to keep yields on Ugandan debt relatively attractive, spur a return of offshore investors and support the local currency.
At an auction last week the rate on the benchmark 91-day paper edged up to 18.1 percent from 17.4 at the previous sale although yields on the 182-day and 364-day notes fell slightly.
"We might see the local currency trade range bound this week with a possibility of a depreciation on expected improved demand for the dollar," said a market brief from Stanbic Bank.
Faisal Bukenya, head of market making at Barclays Bank, said the shilling would trade in the 2,470-2,500 range this week.