KAMPALA: The Ugandan shilling strengthened on Tuesday after the central bank said it planned to sell dollars, a day after the local currency hit a record low. At 0924 GMT commercial banks quoted the shilling at 3,450/3,470, after pulling back from a record low of 3,685/3,695. It had closed Monday at 3,655/3,665.
"The central bank actually sold dollars twice this morning," said Shahzad Kamaluddin, trader at Crane Bank. "The bold action has helped restore confidence in the unit."
Dollar demand has been strong in recent days in the interbank market and among energy, manufacturing and telecoms companies. So far this year, the shilling is 19 percent weaker against the dollar, and Uganda's growing current and fiscal deficits is expected to undermine the currency further.
Stephen Kaboyo of Alpha Capital Partners said in a market note China's economic crisis was also undermining regional currency.
"African economies that rely on sale of commodities to China will be badly hit by the events in China," Kaboyo said. "In the region we are likely to witness a wave of contagion sweeping across this coupled with other domestic factors will keep the shilling on the back foot."
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