Tuesday, 14 July 2015 16:33
KAMPALA: The Ugandan shilling held steady on Tuesday on the back of tighter liquidity in money markets as companies paid their mid-month taxes. Commercial banks quoted the shilling at 3,290/3,320 against the dollar at 0902 GMT, unchanged from Monday’s close.
“Liquidity is very tight as we have not had any injections in days,” said Shahzad Kamaluddin, a trader at Crane Bank.
Kamaluddin said the market now expects the currency to strengthen, aided by a combination of corporate tax payments falling due and an interest rate increase by the central bank.
At an emergency meeting on Monday Bank of Uganda’s monetary policy committee raised the benchmark lending rate to 14.5 percent from 13 percent, saying that recent depreciation of the shilling had raised the risk of high inflation.
The shilling is down 15.7 percent this year, under pressure from rising imports and a dollar that has firmed on expectations that the US Federal Reserve will start raising interest rates by the end of the year.
Stanbic Bank trader Benon Okwenje said that the central bank’s tight lid on liquidity had eliminated the wild volatility that characterised the market last week.
He said he expects the shilling to post gains gradually but that it is likely to remain rangebound between 3,250 and 3,350 in the short term.
