KAMPALA: The Ugandan shilling gained 0.7 percent against the dollar on Friday boosted by a sell-off of the greenback by commercial banks but was seen pressured next week on the back of dollar demand from importers.
At 0901 GMT commercial banks quoted the currency of east Africa's third largest economy at 2,665/2,675, stronger than Thursday's close of 2,678/2,688.
"Banks were offloading some of their dollars probably to trim their holdings and square positions which pushed (strengthened) the shilling," said Faisal Bukenya, head of market making at Barclays Bank.
"We anticipate strong demand from importers next week which might drag the shilling back under pressure."
The local currency has been on the ropes this week, pressured by a panicked rush for the dollar by fuel, manufacturing and other importers looking to stock vital supplies ahead of Kenyan presidential elections on March 4.
Like much of the east African hinterland, Uganda depends on Kenya's Mombasa seaport for its external trade and there are jitters the country's flow of imports could be disrupted as happened in 2007.
Analysts say the shilling could breach the key psychological level of 2,700 next week as the election-related fears continue to spook the money market and the rush for dollars by importers intensifies.
"In the coming week, market dynamics will largely depend on BOU (Bank of Uganda)'s market actions on the supply side and end month flows," said Stephen Kaboyo, managing director, Alpha Capital Partners.
"It is projected that (dollar) demand will continue pulsating rapidly."
Comments
Comments are closed.