Ugandan shilling a notch stronger after central bank rate hold

The Ugandan shilling was a touch stronger after the central bank maintained its tight monetary policy stance on Wednesday but traders said the market was still jittery over a prospect of a U.S. interest rate hike.

At 1132 GMT, commercial banks quoted the shilling at 3,380/3,390, slightly stronger than Tuesday’s close of 3,390/3,400.

“Keeping the policy tight yielded a favourable sentiment for the local unit,” said Faisal Bukenya, head of market making at Barclays Bank Uganda.

“But there’s overall worry about the anticipated Fed rate hike that is keeping a chill on the outlook.”

The central bank of Uganda on Wednesday left its benchmark Central Bank Rate (CBR) unchanged at 17 percent, saying its run of policy tightening since April had started to ease inflationary pressures.

Since April, the bank has hiked the CBR by a total of 600 basis points saying it wanted to curb soaring inflation fuelled by a weak local currency.

A Bank of Africa market report said “an upward adjustment of the Fed (U.S. Federal Reserve) rate is expected to influence the trend in the medium term toward… shilling depreciation.”