KAMPALA: The Ugandan shilling weakened on Monday on dollar demand from commercial banks and manufacturers but a mop up of excess liquidity by the central bank was seen offering some support.
At 1013 GMT commercial banks quoted the shilling at 2,760/2,770, weaker than Friday's close of 2,753/2,763.
"Pressure is being exerted mainly by commercial banks although a bit of demand is also coming from manufacturers," said Faisal Bukenya, head of market making at Barclays Bank.
"We anticipate more pressure on the shilling... but it might be limited because of today's repo."
The central bank or Bank of Uganda (BoU) removed a total of 386.5 billion shillings ($140.04 million) from the money market via a seven-day repurchase agreement. By absorbing excess liquidity, the bank makes it relatively more expensive to hold long dollar positions, which lends support to the shilling.
Traders said commercial banks are likely to stock up on the greenback as they seek to square positions before the year-end.
The shilling has weakened 8.7 percent against the greenback so far this year, largely on dollar buying from importers.
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