Uganda Shilling Continues to Depreciate Despite BOU Intervention

The Uganda Shilling continued to weaken hitting a low of 2,953 shillings on the sell side despite intervention by the central bank.

The Bank of Uganda Thursday morning intervened in the market by selling US dollars in an attempt to save the shilling from further fall. For over a week now the shilling has been in free-fall, threatening to hit the unprecedented 3,000 shillings mark.

The shilling rallied on the central bank\'s intervention, strengthening a little bit from the 2,930 buying and 2,940 selling averages to, before falling back to the 2,953 mark.

The Bank of Uganda on its website posted the shilling against the dollar at 2,939 buying and 2,949 selling.

The central bank\'s rate for the shilling against Kenyan Shilling stood at 32.2 buying and 32.5 selling. Kenya is Uganda\'s biggest trading partner.

Stephen Kaboyo of Alpha Capital Partners, watchers of the local financial market, says the current trend is underpinned by a surge in demand as players build positions ahead of dividend payments where corporates pay out to their foreign shareholders.

This, explains Kaboyo, is exacerbated by very low forex supply levels that is why the central bank\'s intervention in the morning offered only temporary relief and shilling has continued to depreciate breaking the resistance level and now trading at 2953 on the sell side.

Kaboyo says a weaker shilling will push the cost of imports higher and worsen the country\'s trade deficit, the difference between exports and imports, which stands at about five trillion shillings. Higher costs of imports could result into higher prices of imported goods which costs would be borne by the common person.

According to the International Monetary Fund, the Uganda Shilling is presently the worst performing currency in Africa despite favourable economic outlook.