Uganda's central bank sells dollars to support shilling

By Wesley Spartan

KAMPALA- Uganda's central bank sold an
undisclosed amount of dollars on Friday to support the weakening
shilling after it hit a new low versus the dollar.
The local currency recouped some of its losses to trade at
3,265/3,275 at 0801 GMT from an all-time low of 3,365/3,375 in
early trade that prompted the central bank intervention. 
The shilling, which is 15 percent weaker to the dollar so
far this year, had closed at 3,285/3,295 on Thursday. 
"There was huge interbank demand which was weighing on the
shilling but the market sentiment was also being driven by the
depreciation of other regional currencies," said Faisal Bukenya,
head of market making at Barclays Bank.
The shilling has been under steadily escalating pressure
fueled by strong demand for the U.S. currency from commercial
banks and a globally bullish greenback.
Investors were also unnerved by a 71 percent jump in public
spending for 2015/16 national budget ahead of the east African
nation's presidential elections early next year.

Although the local currency has been under enormous pressure
for weeks, the central bank had kept from intervening, prompting
relentless stockpiling of greenbacks by commercial banks on
concerns that the shilling could weaken even further.
"The silence of the central bank was worrying the market,"
said Benon Okwenje, trader at Stanbic Bank.
Okwenje said the depreciation had reached a level where "we
could easily have a run on the shilling."