KAMPALA: The Ugandan shilling weakened 0.7 percent on Wednesday, as banks and other businesses sought to cover short positions and extended the currency's recent slide against the dollar.
At 0801 GMT, commercial banks quoted the shilling at 2,830/2,840, weaker than Tuesday's close of 2,810/2,820.
"There's a lot of panicked demand by banks and some who were short are covering positions," said Shahzad Kamaluddin, trader at Crane Bank, adding that demand for dollars from companies was also returning after a lull during the holiday season.
The local currency, which began this year on a sharply bearish tone, lost 9 percent of its value in 2014. Traders said the central bank could intervene to cushion the fall and ease inflationary pressures that could filter into the economy.
But Kamaluddin said the shilling could recover some ground because of tighter shilling liquidity in the interbank market.
Overnight lending rates have reached 12.5 percent, compared to an average of 8 percent when the market is well supplied.
Faisal Bukenya at Barclays Bank said some pressure on the shilling was coming from offshore buyers of dollars.
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