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Ugandan Shilling Nears Record Low on Surging Dollar Demand
The Ugandan shilling is facing significant downward pressure, driven by a surge in demand for the U.S. dollar amid ongoing geopolitical tensions and persistent local corporate demand, according to a report by Reuters.
On Thursday, commercial banks quoted the shilling at 3,925/3,935 to the dollar, a notable depreciation from last Thursday's closing rate of 3,860/3,870.
Key Drivers of Depreciation
Market analysts point to two primary factors weakening the shilling. Adam Mugume, the executive director for research and policy at Uganda's central bank, noted that sustained, strong dollar demand from manufacturing and energy sector firms is a key driver.
Additionally, Mugume stated that uncertainty surrounding the duration of the conflict in Iran has prompted some market participants to engage in forward purchases of dollars to hedge against further currency declines. This flight to the safe-haven U.S. dollar is exacerbating pressure on the local currency.
AdMarket Outlook
Traders are closely watching the currency's performance, with some forecasting further weakness. One trader indicated that the shilling could potentially reach the 4,000 level against the dollar in the coming days, which would mark a new all-time low.
The pressure on the shilling reflects a broader regional trend. Currencies in Ghana and Zambia are also expected to remain under pressure in the coming week, while the currencies of Nigeria and Kenya are forecast to hold steady, traders said.
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