The Ugandan shilling hit a new low against the dollar as worry
over the impact of conflicts in major export markets, South Sudan and Burundi, and
fears of rampant pre-election spending dominated trading.
Traders said dollar strength also weighed on the local currency,
adding the trend is expected to persist.
Reuters news agency reported that by 0941 GMT Monday commercial
banks quoted the shilling at 3,435/3,445, an all-time low and down from
Friday's close of 3,380/3,390. The shilling has lost a fifth of its value
against the dollar this year.
Falling exports, a surge in government imports for transportation
and infrastructure projects, fears over a public spending spree before next year's
elections, conflicts in South Sudan and Burundi, and a widening current account deficit were all contributing,
according to dealers.
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| The Ugandan shilling (seen right) has hit an all time low against the US dollar |
The shilling's depreciation has also accelerated in recent weeks on
the back of strong interbank demand.
"The buying pressure is in the interbank market, we're
not seeing a lot corporate buyers," Barclays Bank head of market making,
Faisal Bukenya, said.
Reluctance by the central Bank of Uganda (BoU) to intervene has
also undermined market sentiment.
BoU has suggested it was unlikely to intervene aggressively to
support the shilling because depreciation was unavoidable and that keeping the
shilling artificially strong was unsustainable.
"Overall the shilling's tone will remain on the
depreciation side because the dollar is strong globally," Crane Bank
trader, Ali Abbas, said.