Ugandan shilling stable; corporate dollar demand may weigh

The Ugandan shilling was unchanged on Monday but traders said demand for dollars could inch up later in the week as firms prepare to close their books for the year.

At 1105 GMT, commercial banks quoted the shilling at 3,355/3,365, unchanged from Friday’s close.

“As December kicks in, corporates looking to square their positions ahead of year closure will be buying,” said Shahzad Kamaluddin, trader at Crane Bank.

So far this year, the shilling is 17.4 percent weaker against the greenback. The government has said it intends to borrow $200 million to help curb the depreciation pressure.

The shilling could also draw support if, after a surge in inflation, the central bank hikes its policy rate from 17 percent next month.

The statistics office on Monday said headline inflation rose to 9.1 percent in November, from 8.8 percent in October, fuelled by energy costs.

Stephen Kaboyo of Alpha Capital Partners also thinks the Bank of Uganda is likely to increase its benchmark rate, anticipating “a possible rate rise in the U.S. whose effects are likely to reverberate across the frontier markets.”