Ugandan shilling flat, seen firming on higher rates

The Ugandan shilling was stable on Thursday and traders said it was likely to strengthen due to the central bank’s tightening stance and farm export earnings.

At 0935 GMT, commercial banks quoted the shilling at 3,615/3,625, unchanged from Wednesday’s close.

“As the year nears the end, we anticipate an increase in inflows from exporters of commodities like coffee,” said David Bagambe, trader at Diamond Trust Bank.

Uganda is Africa‘s largest coffee exporter.

The increased inflows, he said, would buoy the shilling as a slowdown in imports and a tight policy stance curb demand for dollars.

“Right now it’s not prudent to hold long dollar positions for commercial banks because of the cost of funds but also because we don’t anticipate significant demand,” Bagambe said.

On Tuesday, the central bank raised its key rate to 17 percent from 16 percent, to tame price pressures. The tightening spurred a strong rally for the shilling.