Story
Ugandan Shilling Weakens Past 3,900 on Strong Corporate Dollar Demand
Summary
The Ugandan shilling has depreciated against the U.S. dollar, driven by heightened demand from manufacturers and energy firms, with traders eyeing a potential record low of 4,000.
The Ugandan shilling has come under significant pressure, weakening against the U.S. dollar due to a surge in demand from local corporations. Commercial banks quoted the shilling at 3,925/3,935 to the dollar on Thursday, a notable decline from the previous week's closing rate of 3,860/3,870, according to a Reuters report.
Corporate Demand and Geopolitical Jitters
The primary driver of the shilling's depreciation is sustained, strong demand for hard currency from companies in the manufacturing and energy sectors. This has been compounded by broader market uncertainty, which is prompting some participants to secure dollars for future needs.
Adam Mugume, the executive director for research and policy at Uganda's central bank, noted that uncertainty related to international conflicts has led some market players to make forward purchases to lock in exchange rates, the report stated.
Outlook and Potential Record Low
Market sentiment suggests the shilling could continue its downward trend in the near term. One trader cited in the report indicated that the currency could reach the 4,000-per-dollar level in the coming days.
AdA move to 4,000 would represent the shilling's weakest level ever recorded against the U.S. currency, marking a significant psychological and economic milestone for the market.
Regional Currency Movements
The pressure on the shilling reflects a mixed outlook for other regional currencies. Traders expect the currencies of Ghana and Zambia to also remain under pressure in the week ahead.
In contrast, the currencies of Nigeria and Kenya are forecast to hold largely stable, according to market participants cited in the report.
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