The Bank of Uganda bought $48.9 million from the interbank foreign exchange market in September as it continued to shore up its reserves of hard currency.

This is despite a 6.1 per cent depreciation of the local unit against the dollar, from Ush2,502 to Ush2,655, between January and September.

But comparing the average exchange rate for August and September, BoU’s executive director for research Adam Mugume said that the shilling has been stable, depreciating from Ush2,613 per dollar to Ush2,614.

Faisal Bukenya, the head of market making at Barclays Bank Uganda said the country was experiencing a stagnation in dollar inflows.

“On the domestic front it is because of low foreign aid, low export earnings and low remittances; from the global front, it is due to investors’ shift back to the US economy,” said Mr Bukenya.

He said stagnating inflows amid increased demand for the dollar means that while Uganda’s foreign exchange market is relatively stable, the shilling is likely to remain weak in the near future.

The dollar has been strengthening against major currencies on the global financial market since the Federal Reserve’s decision to end its quantitative easing campaign.

READ: East Africa currencies fall against dollar

This, together with the strengthening of the US economy in the recent past has seen the demand for the dollar by international investors in the global financial market rise.

“Demand is mainly interbank. The local currency is likely to face growing pressure if this demand is sustained until late into the year, when the market expects steady inflows on account of remittances,” said Alpha Capital chief executive Stephen Kaboyo.