Traders hope the central bank will intervene by selling dollars to help the shilling.
The Ugandan shilling weakened Tuesday due to end-month dollar demand from manufacturing and energy importers and traders said the central bank could intervene by selling dollars to help the shilling.
At 1000 GMT commercial banks quoted the shilling at a five-day low last seen on October 22 of 2,708/2,718, weaker than Monday’s close of 2,702/2,712. Prior to its decline this past week, the shilling last traded weaker than 2,700 to the dollar in January 2013.
“Pressure on the shilling is rising because we have strong and consistent demand from manufacturing and energy firms,” said Ahmed Kalule, trader at Bank of Africa.
“My thinking is we’ll see more depreciation unless Bank of Uganda (central bank) comes in on the supply side.”
The local currency has been under pressure largely on account of strong demand from importers who are making payments for their monthly imports and others shipping in goods in advance for year-end holiday shoppers.