Uganda Shilling loses ground to the Dollar in New Year
The Uganda Shilling has lost ground to the US Dollar as the New Year sets in trading at an average of 3609/3629 against the Dollar, which is about 500 Shillings from the pre-Christmas rate.
Before Christmas, the Shilling traded against the dollar in the range of 3580/3590. Major Forex Bureaus in central Kampala are posting over 3600 on the buy side on their counters. The Bank of Uganda, whose exchange rates determine the market rates, has the Dollar buying at 3,604 and selling at 3.614 today.
Stephen Kaboyo from money market watchers Alpha Capital Partners attributes the weakening of the Shilling to weaker than expected foreign exchange inflows, especially from the Ugandan diaspora.
The Ugandan diaspora annually remit about one billion US Dollars, making their remittances the biggest foreign exchange inflow in Uganda. According to Kaboyo, seasonal inflows from Ugandans living abroad fell short of expectation.
Kaboyo adds that there has also been an increase in demand for the Dollar from importers and commercial banks, adding that commercial banks have been covering short positions, hence the depreciation.
On the near term outlook, Kaboyo says the Shilling will most likely remain weak as businesses resume operations after the holidays