KAMPALA: The Ugandan shilling weakened on Friday, undermined by interbank dollar demand but was expected to be supported next week by end-month inflows from non-governmental organisations.
At 1114 GMT commercial banks quoted the currency of east Africa's third largest economy at 2,530/2,540, weaker than Thursday's close of 2,525/2,535.
"We saw significant demand in the interbank which pushed the shilling higher (weaker) although it has eased off," said Benon Okwenje, trader at Stanbic Bank. "Next week we should see end-month flows from sources like NGOs start to come in and the shilling will possibly get a bit of support." Non governmental organisations typically convert part of their hard currency holdings at the end of the month to pay salaries and other operational expenses.
The shilling has lost 0.4 percent against the greenback in the year to date and has largely been helped by tight shilling liquidity and flagging appetite for dollars by corporate firms. Stephen Kaboyo, managing director at Alpha Capital Partners, said the shilling was likely to trade range bound between at 2,520-2,550 next week but that pressure was likely to weigh as the end of the government's fiscal year (July-June) nears.
"As we come to the end of financial year with only five weeks left, we are likely to see increased government spending," he said. "And if this materialises, shilling liquidity could spill over in the foreign exchange market and cause depreciation pressures in month of June."
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