Reuters: US Dollar Report: Ugandan shilling firms, eye on central bank rate decision

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Ugandan shilling firms, eye on central bank rate decision Nov 30th 2012, 12:51 Tweet Share this Email Print Fri Nov 30, 2012 7:51am EST KAMPALA, Nov 30 (Reuters) - The Ugandan shilling firmed on Friday as demand for the U.S. dollar slowed after two central bank sales in less than one week. Market players expected the local currency to trade in a narrow range next week. Uganda's inflation rate - a main driver of the currency over the past year - rose in November. Traders said this could prompt the central bank to leave interest rates on hold next month, propping up the premium investors get for holding the shilling. The Uganda bureau of statistics on Friday reported inflation in east Africa's third-largest economy rose for the first time in eight months to 4.9 percent in November, from October's 4.5 percent. The central bank, Bank of Uganda (BOU) is due to announce its benchmark Central Bank Rate (CBR) for next month on Tuesday. At 1228 GMT commercial banks quoted the shilling at 2,675/2,685, stronger than Thursday's close of 2,690/2,700. "After the two central bank interventions in recent days we've seen demand for the greenback come down significantly," said Thaib Lubega, trader at Stanbic Bank. "The shilling is drawing some energy from that slump in dollar demand for now and the common sentiment is that we're likely to see it play in a narrow range next week." The shilling has lost 7.5 percent of its value in the year to date. Recent pressure fuelled by greenback purchases by importers and offshore investors cutting their positions in Uganda debt market saw it hit a 13-month low on Wednesday. Analysts say a gradual reduction in the size of cuts of bank's lending rate will give the shilling support in the medium term. Although headline inflation rose, core inflation which the central bank targets, fell to 3.8 percent from 4.0 last month, well below BoU's target of 5 percent. "Going forward I foresee softening demand for dollars. That combined with a likely freezing of the CBR will probably hold the shilling stable or lean toward the lower side (stronger)," said a trader at a leading commercial bank. UGX Spot Rate.................... Ugandan Shilling Money Guide.... Calculated Cross Rates.......... Deposits..................... Deposits & Forwards............. Uganda Equities Guide....... Uganda All Share Index........ Shilling background ..... Ugandan Debt Guide............ All Uganda Bonds............. Uganda T-Bills.............. Uganda Benchmark............. Central Bank ................ Ugandan Contributor Index.... Uganda Coffee Prices....... Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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