LONDON, Dec 15 – Kenya’s and Uganda’s shillings are likely to strengthen next week due to waning demand for dollars as the year comes to a close. The Ugandan shilling may also be helped by foreign currency inflows from the diaspora.
UGANDA
Uganda’s shilling will trade rangebound, but could strengthen due to muted dollar demand ahead of the holidays and inflows from Ugandans living abroad, traders said.
The local currency rallied sharply against the dollar in early morning trading on Thursday, spurring the central bank to intervene and purchase an unspecified amount of dollars. At 0810 GMT commercial banks quoted the local currency at 2,385/2,395, far stronger than last Thursday’s close of 2,458/2,468.
In earlier Thursday trade it touched 2,360 to the dollar, nearing an eight-month high.
The shilling has gained 6.3 percent against the dollar in December. “We’re in a period where Ugandans abroad are coming home for holidays with lots of foreign currency. We also had an auction yesterday so the market is flush with dollars,” said Ahmed Kalule, a Treasury dealer at Bank of Africa.
The Bank of Uganda (BoU) yesterday held a 95 billion shillings ($39.8 million) Treasury bill auction, which was oversubscribed.
“These are the same conditions that are likely to prevail over the next week,” said Kalule. “So I see the shilling swaying in a range but inclined toward the stronger side.”
He said it would trade between 2,350 and 2,400 through next Thursday.
The shilling has rebounded strongly from its Sep. 23 record low of 2,901 against the dollar, recouping 17.6 percent of its value since.
“The main drivers for the shilling for the remaining part of the year will be low corporate demand and inflows from overseas Ugandans and that’s likely to keep it upward,” said Faisal Bukenya, head of market making at Barclays Bank Uganda.
Source: Reuters Africa newsletter
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