Ugandan Shilling Nears Record Low on Surging Corporate Dollar Demand

The Ugandan shilling is facing increased pressure, weakening against the U.S. dollar amid a surge in demand from local companies and heightened market uncertainty. Commercial banks quoted the shilling at 3,925/3,935 to the dollar on Thursday, a notable depreciation from last Thursday’s closing rate of 3,860/3,870, according to a Reuters report.

Corporate Demand and Market Jitters

The primary driver behind the shilling's decline is robust demand for hard currency, particularly from manufacturers and firms in the energy sector. Adam Mugume, the central bank’s executive director for research and policy, noted that ongoing geopolitical uncertainty related to conflict in Iran is also influencing market behavior.

This has prompted some market participants to make forward purchases of dollars to secure future exchange rates, a move that further fuels current demand, Mugume said, per the report.

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Outlook and Regional Context

Market sentiment suggests the shilling could continue its downward trend in the coming week. One trader cited in the report forecast that the currency could breach the 4,000-per-dollar level, which would represent its weakest point on record.

Elsewhere in the region, the currencies of Ghana and Zambia are also expected to remain under pressure. In contrast, traders anticipate that the currencies of Nigeria and Kenya will hold largely stable.