Uganda shilling slips on dollar demand from energy, telecoms sectors

The Ugandan shilling weakened marginally against the dollar on Friday as telecommunications and energy sector companies bought the greenback, and analysts said they expected the local currency to weaken to 2,600 per dollar soon. At 1115 GMT commercial banks quoted the currency of east Africa’s third-largest economy at 2,565/2,575, weaker than Thursday’s close of 2,560/2,570. “The shilling has been pressured by an uptick in demand from companies from the telecommunications and energy sectors,” said Dickson Magecha, trader at Standard Chartered Bank. “And the market remains heavily tilted toward a weaker shilling.”Uganda’s currency has remained under moderate pressure since the central bank cut its benchmark interest rate this week, as the prospect of a slowdown in dollar inflows from offshore investors in Ugandan debt has unnerved the market.Bank of Uganda slashed the rate to 13 percent from 15 per cent to spur faster economic growth at home. Analysts say the shilling is also likely to depreciate at a faster pace in the medium term as the flow of cheaper money from commercial banks picks up. That flow may raise dollar demand as investors import machinery, spare parts and raw materials to increase output, weakening the local currency in the process. “It’s now possible we might hit the key psychological level of 2,600 next week if this demand is sustained and supplies remain tight as we have seen lately,” said Faisal Bukenya, head of market making at Barclays Bank.

News

Uganda shilling slips on dollar demand from energy, telecoms sectors