Uganda shilling weakens against the dollar in two years

Ugandan exchange
U.S dollar will most likely weaken the Ugandan Shilling to 3,900 from the current average of 3,600 by end of this year. Courtesy Photo.

The shilling this week slumped against the US dollar, getting to its weakest point in two years.

The shilling shifted from its stable range of 3,600 and traded in the range of 3,645/3,655, for the first time in two years.

According to Stephen Kaboyo of Alpha Capital Partners, which watch the market, the shilling was under immense pressure on account of strong demand from the inter-bank, as commercial banks rushed to cover their short positions.

Kaboyo says significant demand was also seen from the energy, manufacturing and importers. By close of the week the shilling registered a modest rebound from its earlier losses as demand receded.

Kaboyo forecasts that the shilling will remain volatile as pockets of demand continue to play out coupled with an undercurrent of negative sentiment on account of domestic and regional political developments.

The Kenyan Shilling was also under pressure due to negative sentiments around the planned repeat presidential election and the deteriorating political and security situation in Uganda’s biggest trading partner.

Kaboyo says the anxiety kept the markets on the edge and the central bank of Kenya intervened and sold dollars in order to calm the markets.

The last time the shilling breached the 3,650 mark was in the last quarter of 2015 on account of prolonged drought and upsurge of conflict in South Sudan, then Uganda’s biggest trading partner.

Speaking to the media Thursday, Uganda’s Secretary to the Treasury Keith Muhakanizi said the Kenyan political turbulence is not yet having any significant effects on Uganda.