KAMPALA: The Ugandan shilling lost ground on Monday despite tight liquidity conditions, undermined by dollar demand in the interbank market as banks sought to cover short positions.
At 0911 GMT commercial banks quoted the shilling at 2,980/2,990, weaker than Friday's close of 2,970/2,980.
"There's short position covering by some players," said Shahzadd Kamaluddin, trader at Crane Bank.
"That's applying a bit of pressure although there's scarcity of shillings in the market."
Kamaluddin said the liquidity squeeze had pushed the rate on overnight funds to about 12 percent from 9 percent on Friday.
The Bank of Uganda raised its policy rate by 100 basis points to 12 percent last week, saying it wanted to prevent a weak currency from pushing core inflation beyond its medium-term target of 5 percent.
The local currency, which has lost 7 percent of its value against the dollar so far this year, gained briefly after the rate move but has gradually grew bearish again.
Much of the pressure on the shilling has been exerted by strong corporate demand and a globally strong dollar.
Comments
Comments are closed for this article.