The shilling yesterday continued to post mixed recovery against the dollar after a two month-long losing streak. Early this month the unit had breached the Shs3,900 resistance level.
The shilling had since the beginning of the year lost by about 8 per cent against, putting pressure on the stability of an economy that is experiencing a number of volatilities from high fuel prices and weak growth.
Yesterday the unit opened at Shs3,684.58 before weakening slightly to trade at Shs3,709.92. However, it closed the day weaker trading at Shs3,718.58.
Ms Charity Mugumya, the Bank of Uganda director for communications, told Daily Monitor the shilling had been buttressed by growth in dollar inflows mainly from offer shore investors, non-governmental organisations and coffee receipts.
“The shilling has been supported by [dollar] inflows mainly from offshore players, NGOs, coffee receipts and tight liquidity conditions in the money markets,” she said.
The recovery streak had started mid last week with analysts saying it was too early to make an informed projection.
Mr Stephen Kaboyo, the managing partner at Alpha Capital, said the outlook indicates that the shilling will remain range bound, which means that its movements – in whichever direction – will be limited.
“Domestic demand conditions will dictate the course of the market in the near term,” he said.
However, the market continues to be jittery and some forex traders have maintained a high trading position.
Yesterday forex traders quoted the unit at an average of Shs3,750 while others traded at a flat rate of Shs3,800.
Coffee, which is one of Uganda’s major export commodity, according to Ms Mugumya, has been key in recouping some value for the shilling.
However, Mr Emmanuel Iyamulemye, the Uganda Coffee Development Authority executive director, indicated they continue to hold a lot of coffee in stock because of unfavourable prices.
“We have a lot of coffee in stock because the prices have not been favorable,” he said.
Ms Mugumya also said local demand for dollars has reduced to normal and the reported weakening of the dollar against major currencies has offered the shilling some reprieve.
According to Bloomberg, the dollar yesterday had weakened to 94.19 up from 95.31 at the close of June.
In June alone, according to market experts, Bank of Uganda injected more than Shs250b in the money markets as it sought to reduce the rate at which the shilling was falling.
Experts had also predicted that the unit would breach the Shs4,000 mark by the end of the year if serious interventions are not made.