KAMPALA: The Ugandan shilling lost ground on Wednesday as commercial banks bought dollars, but its weakening was expected to be limited by a shortage of local currency.
At 1027 GMT, commercial banks quoted the shilling at 2,743/2,753, weaker than Tuesday's close of 2,730/2,740.
"Some banks are going long, I think the bullish trend of the dollar in international markets is driving their demand," said Shahzad Kamaluddin, trader at Crane Bank.
"However there's significant tightness in availability of the local unit so we could see a rebound."
Traders said overnight interbank lending rates ranged between 10-13 percent on Wednesday from a range of 6-9 percent a few days ago.
Sage Daniel Muganza, trader at Centenary Bank said the dollar demand will be short lived.
"On the other hand what will be more fundamental in driving the shilling is the dwindling importer demand," he said.
The local currency has lost 8.1 percent against the dollar so far this year, largely due to dollar demand from importers.
Some traders say remittances from Ugandans working abroad returning for holidays and inflows from commodity exporters could help offer support over the next several weeks.
The central bank has been mopping excess liquidity from the money market, which tends to make it more costly to hold dollars and helps support the shilling.
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