UPDATE 1-Uganda c.bank tries to prop up currency hit by anti-gay law

Thu Feb 27, 2014 5:07am EST

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(Adds details and context)
    By Elias Biryabarema
    KAMPALA, Feb 27 (Reuters) - Uganda's central bank intervened
for the second day running to stem a fall in the shilling 
triggered by the enactment of a radical anti-gay law, which has
prompted Western donors to withdraw or review aid payments.
    Traders said the Bank of Uganda sold dollars as the shilling
fell to 2,520/2,530, pushing it back up to near Wednesday's
closing price of 2,505/2515, only to see it fall back again to
2,530/2,540 to the dollar.
    "We have seen the pressure on the shilling continuing even
today, which prompted the central bank to intervene ... The
speculation about aid cuts is really unnerving the markets,"
said Ahmed Kalule, trader at Bank of Africa.
    The currency of east Africa's third largest economy has been
firm this year but dived on Wednesday as Western anger grew over
President Yoweri Museveni's signing of the anti-homosexuality
law.
    Announcements by Denmark and Norway that they would withhold
aid, and threats by other Western countries to review relations
and financial support, have spurred investors to buy hard
currency.
    "The situation is being exacerbated by the fact that the
market is also short of dollars, and then we have this panic
buying ... also some people are building positions in
anticipation of end-month demand," Kalule added.
    Manufacturers usually buy higher amounts of dollars at the
end of the month to pay for the next month's raw material
supplies.  
    Faisal Bukenya, head of market making at Barclays Bank, said
the central bank interventions appeared to be too small to
outweigh the appetite for hard currency.
    The Bank of Uganda does not usually the size of its
interventions for fear of encouraging speculation.
    Some analysts said the impact of aid cuts was being
exaggerated and that donors were likely to divert their aid to
civil society organisations rather than cut it off entirely. 
    Others also note that China, which has increasingly emerged
as Uganda's primary source of external support, has not followed
Western donor pressure on Uganda, which they said should offset
some of the worries over the impact of aid cuts. 
        
    UGX Spot Rate.....       
    Ugandan Shilling Money Guide....        
    Calculated Cross Rates..........        
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    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.......             
 
 (Reporting by Elias Biryabarema; Editing by George Obulutsa)
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