Shilling Depreciates Against U.S. Dollar By 2.3 Percent

The Uganda Shilling has depreciated against the ‘popular’ United States Dollar (USD) by 2.3 percent over the last 15 working days, according to Bank of Uganda (BoU).

It said, as of June 24, the local unit depreciated to Shs 2,616 per US dollar from Shs 2,556 as of June 02, 2014.

In a statement released on June 25, Edward Tenywa, the assistant director, communications department at BoU said, the depreciation is mainly a reflection of the evolution of key determinants of the exchange rate in the market namely lowering of interest rates on Uganda government securities which has made other emerging and frontier markets relatively more attractive, and the g corporate demand for foreign currency on account of dividend payments.

Aerse sentiments about future donor flows have also played a role, according to Tenywa. To stem the depreciation, he said, Bank of Uganda intervened on June 24 and this has restored stability in the foreign exchange market. He did not give the specifics.

He added that Bank of Uganda has more than US$ 3 billion of foreign exchange reserves to support the currency in the event of serious pressures in the foreign exchange market.

James Mutuku, the head of financial markets at Standard Chartered Bank said on June 21 that corporate tax payments are expected to give the local unit support while continued interbank demand should balance that out. Mutuku expects the unit to trade in the range 2575-2625 per US dollar by end of this week.

Source : The Independent

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