Uganda shilling firms on interbank selling, NGO dollar flows

The Ugandan shilling clawed back some of its recent losses on Tuesday, helped by interbank selling of dollars and inflows of greenbacks from commodity exporters and non-governmental organisations (NGOs).

At 0920 GMT commercial banks quoted the shilling at 3,400/3,430 to the dollar, stronger than Monday’s close of 3,470/3,485.

“The shilling has made a reversal (strengthened)…From what we’re seeing it’s a combination of customer flows and interbank selling,” said Benon Okwenje, trader at Stanbic Bank Uganda.

Between Thursday and Monday, the shilling weakened sharply and Okwenje said the market was still volatile and the spread between bid and ask rates had gone as high as 30 shillings.

In normal trade, the spread is usually 10 Ugandan shillings.

Another trader from a leading commercial bank said most of the flows were from non-governmental organisations and agricultural commodity exporters.

The trader said the shilling‘s gains were likely to prove fleeting if the U.S. Federal Reserve hikes its interest rates for the first time in nearly a decade at its meeting this week.

So far this year the shilling is 18.6 percent weaker against the greenback.

The central Bank of Uganda (BoU) is also due to announce its key rate decision on Wednesday and market players were keen to see if policymakers would further tighten its monetary policy stance, potentially offering some support for the shilling.