Uganda shilling up on inflows from exporters, charities

KAMPALA (Reuters) - The Uganda shilling strengthened on Friday due to dollar inflows from commodity exporters, charities and sell-offs by offshore investors betting on a weaker greenback.

At 0932 GMT commercial banks in Kampala quoted the currency of east Africa's third-largest economy at 2,560/2,570, stronger than Thursday's close of 2,575/2,585.

"The market has inflows from the usual commodity exporters and NGOs (non-governmental organisations) while there's not much activity on the demand side," said Faisal Bukenya, head of market-making at Barclays Bank.

"There's also some selling by offshore investors...they're probably betting that the dollar will be weaker going forward."

Uganda's exports of coffee, the country's biggest foreign exchange earner, have surged year-on-year since January with shipments in April jumping 76 percent due to good weather.

Faisal said the local currency would likely oscillate in the 2,555-2,585 range next week.

A conservative monetary policy stance by the central bank has limited appetite for the greenback and kept the shilling on a strong footing since hitting a 14-month low of 2,715/2,725 early January.

It's up nearly 5 percent against the greenback in the year to date although market confidence in its long-term outlook is seen as low, undermined by fiscal pressures expected in the next financial year.

Stephen Kaboyo, managing director of Alpha Capital Partners, said a scheduled bond auction next was unlikely to draw inflows sufficient enough to boost the shilling.

Bank of Uganda is due to sell 2-year Treasury bonds on May 22 worth 100 billion shillings.

"Domestic shilling liquidity levels remain on the high side and the central bank is expected to remain vigilant with its mopping up operations," he said.

"Market outlook suggest a stable shilling holding at the current levels with no apparent game changer on the cards."

Source: http://news.yahoo.com/uganda-shilling-inflows-exporters-charities-112343389.html

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