Ugandan shilling steady, may firm on foreign inflows

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The Ugandan shilling was steady on Wednesday, supported by scarce local currency liquidity, and could trade firmer in coming days as foreign investors seek Ugandan debt.

At 1226 GMT commercial banks quoted the shilling at 2,630/2,640, little changed from Tuesday’s close.

“Most players don’t have enough shillings to buy dollars because there’s significant liquidity tightness in the market,” said Sage Daniel Muganza, a trader at Centenary Bank.

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We’re not expecting a lot of maturities so in the remaining days of the week the shilling should remain supported,” he said.

The local currency is down 4.1 percent against the greenback in the year to date after making some gains this month.

Investors were encouraged by last week’s decision by ratings agency Standard and Poor’s to affirm Uganda’s B sovereign credit rating with a stable outlook. It cited an expanding economy, political stability and infrastructure investments.

Faisal Bukenya, head of market making at Barclays Bank, said rising rates on Ugandan Treasury bills was spurring expectations of more hard currency inflows in the next few weeks.

“We expect more demand for Ugandan paper from offshore people which should boost the shilling,” he said.

Mili Thakur