KAMPALA: Uganda's central bank sold dollars on Friday to stem a slide in the shilling after it hit a five-and-a-half month low early in the session as banks and energy companies offloaded the local currency, traders said.
The Ugandan shilling fell more 1 percent against the dollar on Thursday as commercial banks and offshore investors sold government securities after falling yields made them less attractive.
"It's just panic driving the markets, players are thinking the dollar will be more expensive in the days ahead as offshore investors stay away. So everybody is rushing in to build their dollar positions and that's putting the shilling on the ropes," Denis Mashanyu, trader at Standard Chartered Bank.
At 0925 GMT, the shilling was quoted at 2518/2528, firmer than the 2530/2540 level at which the central bank intervened and a touch up on Thursday's closing price.
Faisal Bukenya, head of market making at Barclays bank in Kampala said offshore investors were not rolling over their positions in government paper as their holdings matured, creating sustained demand for dollars.
Expectations that inflation will fall again this month point to a further easing of monetary policy, also shaking confidence in the shilling, Bukenya said. The central bank cut its benchmark rate to 17 percent in July from 19 percent and signalled it was prepared to cut further.
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