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Ugandan Shilling Weakens Toward Record Low on Strong Dollar Demand
The Ugandan shilling is facing significant downward pressure, weakening against the U.S. dollar due to a surge in demand from importers and heightened market uncertainty. Commercial banks quoted the shilling at 3,925/3,935 to the dollar on Thursday, a notable decline from the previous Thursday’s close of 3,860/3,870, according to a Reuters report.
Importer Demand and Market Uncertainty
The robust demand for hard currency is primarily driven by firms in the manufacturing and energy sectors, according to Adam Mugume, the central bank’s executive director for research and policy. Mugume stated that uncertainty surrounding the duration of the conflict in Iran has also influenced market behavior.
This has prompted some market participants to make forward purchases of dollars to secure exchange rates against further volatility, adding to the immediate demand for the U.S. currency.
Shilling Nears Historic Low
AdThe currency's steady depreciation has led at least one trader to forecast that it could breach the 4,000-per-dollar level in the coming days. Reaching this milestone would mark the shilling's weakest point ever recorded against the U.S. dollar.
Regional Currency Outlook
The pressure on the shilling reflects a mixed outlook for other regional currencies. Traders cited in the report expect the currencies of Ghana and Zambia to also remain under pressure in the week ahead. In contrast, Nigeria’s naira and Kenya’s shilling are forecast to remain largely stable.
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