Wednesday, 26 August 2015 16:50
KAMPALA: The Ugandan shilling was weaker on Wednesday as traders brushed off intervention by the central bank the previous session and focused on a widening current account deficit.
At 0922 GMT, commercial banks quoted the shilling at 3,580/3,610 to the US dollar, compared with Tuesday’s close of 3,570/3,580.
Bank of Africa trader Ahmed Kalule said the central bank’s action would provide only a temporary brake on the currency’s devaluation. “In the market, the current account position is still the overriding concern,” he said.
Uganda has also trimmed its growth outlook.
Kalule said the shilling’s next big support level would likely be around the 4,000 level.
The Bank of Uganda (BoU) sold an undisclosed amount of dollars on Tuesday, providing brief support to the shilling after it touched an all-time low of 3,685/3,695 in early morning trade, prompted by importer demand for dollars.
Stephen Kaboyo of Alpha Capital Partners said the central bank was worried the shilling depreciation was “moving rapidly on contagion concerns from the Chinese economic issues” but said any relief from intervention would be short-lived.
The BoU periodically sells dollars to support the currency, which has weakened by 22 percent to the dollar so far this year.
Traders worry about an expanding current account and budget deficit, which analysts blame of rising spending ahead of the 2016 elections, were eroding confidence.
The budget deficit for fiscal 2015/16 is forecast to be 7 percent of gross domestic product, from 4.5 percent the previous year.
The current account deficit rose to 10.3 percent of GDP in 2015/16, up from 8.5 percent in 2014/15.
