KAMPALA: The Ugandan shilling was stable on Wednesday after a decline in dollar demand, but traders said the local currency could benefit from offshore investors attracted by a rise in debt yields.
At 1053 GMT commercial banks quoted the shilling at 2,645/2,655, little changed from Tuesday's close of 2,647/2,657.
Yields rose across all tenors at a Treasury bill auction on Wednesday where a total of 145 billion shillings ($54.78 million) worth of debt was up for sale.
"The yields' upward movement will generate confidence in the shilling. Some firming (for shilling) is possible but it will be gradual," said Ali Abbas, trader at Crane Bank.
Traders say rates on Ugandan debt have remained relatively attractive to foreign investors in recent months, helping support the shilling which is down 4.7 percent against the dollar so far this year.
David Bagambe, trader at Diamond Trust Bank said dollar demand is normally low at the start of the month, potentially offering support for the local currency.
Some traders said that the shilling could come under pressure later this month if the central bank takes cue from the downward inflationary trend and cuts interest rates.
Falling food prices helped reduce Uganda's annual inflation rate in September, increasing the likelihood that the central bank could cut its benchmark interest rate when it meets next at a date to be announced in October.
Comments
Comments are closed for this article.