Ugandan shilling firms against the US Dollar 18-07-2012

The Ugandan shilling
strengthened slightly on Monday, helped by muted dollar demand,
but a tapering off of offshore investment in government
securities was forecast to keep the local currency on a bearish
tone in the days ahead.
At 0936 GMT, commercial banks in Kampala quoted the currency
of Africa's leading coffee exporter at 2,485/2,495, a touch
stronger than Friday's close of 2,490/2,500.
"Demand for dollars from the corporates is low which had
given some little support to the shilling," said Faisal Bukenya,
head of market making at Barclays Bank.
"The shilling should hold stable this week ... though the
general market sentiment suggests a bias in the direction of
weakening because of expected weak participation of offshore
people in debt auctions."
Uganda's shilling gets some support from offshore investors
into its government securities, which supplement dollar flows
from exports like tea, coffee and tourism.
Last week, the government raised withholding tax on earnings
from investment in Treasury bonds and bills to 20 from 15
percent and analysts say the measure will make Ugandan debt less
attractive to offshore buyers.
On Wednesday Bank of Uganda (BoU) is scheduled to sell
three- and 10-year Treasury bonds each worth 100 billion
shillings and traders say they do not expect much offshore
bidding for the two papers.
"I think the shilling will remain leaning on a weaker
footing in the medium term because of the tax measure," said a
trader at a leading commercial bank.
"But also the general economic weakness and central bank
vows of intervention mean the shilling is unlikely to weaken
past 2,520 levels."
Uganda's economy is expected to slump in the fiscal year
ending June 30, expanding at 3.2 percent from the previous
year's 6.7 percent although BoU says growth will rebound in
2012/13 to between 5 to 6 percent.

Reuters
18 June 2012