Ugandan shilling firms, eye on central bank rate decision

Fri Nov 30, 2012 7:51am EST

Related Topics

KAMPALA, Nov 30 (Reuters) - The Ugandan shilling 
firmed on Friday as demand for the U.S. dollar slowed after two
central bank sales in less than one week.
    Market players expected the local currency to trade in a
narrow range next week. 
    Uganda's inflation rate - a main driver of the currency over
the past year - rose in November. Traders said this could prompt
the central bank to leave interest rates on hold next month,
propping up the premium investors get for holding the shilling.
    The Uganda bureau of statistics on Friday reported inflation
in east Africa's third-largest economy rose for the first time
in eight months to 4.9 percent in November, from October's 4.5
percent. 
    The central bank, Bank of Uganda (BOU) is due to announce
its benchmark Central Bank Rate (CBR) for next month on Tuesday.
    At 1228 GMT commercial banks quoted the shilling at
2,675/2,685, stronger than Thursday's close of 2,690/2,700.
    "After the two central bank interventions in recent days
we've seen demand for the greenback come down significantly,"
said Thaib Lubega, trader at Stanbic Bank. 
    "The shilling is drawing some energy from that slump in
dollar demand for now and the common sentiment is that we're
likely to see it play in a narrow range next week."   
    The shilling has lost 7.5 percent of its value in the year
to date. Recent pressure fuelled by greenback purchases by
importers and offshore investors cutting their positions in
Uganda debt market saw it hit a 13-month low on Wednesday. 
    Analysts say a gradual reduction in the size of cuts of
bank's lending rate will give the shilling support in the 
medium term.
    Although headline inflation rose, core inflation which the
central bank targets, fell to 3.8 percent from 4.0 last month,
well below BoU's target of 5 percent.
    "Going forward I foresee softening demand for dollars. That
combined with a likely freezing of the CBR will probably hold
the shilling stable or lean toward the lower side (stronger),"
said a trader at a leading commercial bank.
      
   UGX Spot Rate.................... 
   Ugandan Shilling Money Guide.... 
   Calculated Cross Rates.......... 
   Deposits..................... 
   Deposits & Forwards............. 
   Uganda Equities Guide....... 
   Uganda All Share Index........ 
   Shilling background ..... 
   Ugandan Debt Guide............ 
   All Uganda Bonds............. 
   Uganda T-Bills.............. 
   Uganda Benchmark............. 
   Central Bank ................ 
   Ugandan Contributor Index.... 
   Uganda Coffee Prices.......
FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.