After two months of steady appreciation against the dollar, the Shilling slightly lost ground this week against the greenback, a development which analysts are not yet sure will continue in the short term. The slight fall in the value of the Shilling against the dollar is as a result of end of coffee export season, pick up on demand in the dollars by the importers and the absence of foreign players.In an interview with Sunday Monitor, the executive director research functions at Bank of Uganda, Dr Adam Mugume, said: “Compared to the exchange rate average for January 2012, the average for February as of 21, still shows an appreciation of about 4 per cent (from 2414.2 to 2318.5). But between 14th and 21st it has depreciated by about 0.2 per cent.”Explaining why the Shilling is beginning to lose ground, Dr Mugume said coffee season is ending and imports demand is strengthening after the usual lull at the end of the year.“But it is self-correcting after a sharp appreciation at the beginning of the month,” he said.The appreciation of the Shilling in the past four and a half months was due to the tight Shilling liquidity condition, inflows from offshore players who are investing in government securities, earnings from coffee exports, remittance and subdued corporate demand for the dollar.
