Wednesday, 02 September 2015 17:15
KAMPALA: The Ugandan shilling posted marginal gains on Wednesday, helped by scant supply of shillings in the runup to a Treasury auction and subdued dollar demand. At 0906 GMT commercial banks quoted the shilling at 3,670/3,680, stronger than Tuesday’s close of 3,680/3,690.
“There’s significant tightness in liquidity because the auction has taken away some of the money,” said Faisal Bukenya, head of market making at Barclays Bank.
Bank of Uganda (BoU) was due later on Wednesday to release results of a Treasury bill auction for 170 billion shillings ($ 46 million) in various tenors.
Such auctions typically support the local currency by attracting inflows of dollars from offshore investors.
Analysts, though, have said foreign investors’ appetite for Ugandan debt has turned tepid, despite high yields, due to the shilling’s sharp depreciation.
Bukenya said there was also a slump in dollar demand from corporates as most were unwilling to buy at current levels, helping lift the shilling.
Traders say the shilling, which has lost 24.6 percent of its value so far this year, is eyeing a new psychological level of 3,700 which they figure would likely trigger an intervention by the central bank.
A trader at a leading commercial bank said the overall tone of the shilling remained biased towards depreciation given Uganda’s ballooning trade deficit weighing.
Central bank data show Uganda’s current account deficit widened to $ 2.4 billion in fiscal year 2014/15 (July-June) from the previous year’s $ 2.1 billion and is projected to deteriorate further to $ 2.8 billion in 2015/16.
