The Uganda shilling held steady against the dollar on Monday and traders said the local currency was expected to appreciate, supported by tight liquidity and mid-month tax payments.
At 0743 GMT, commercial banks in Kampala quoted the shilling at 2,442/2,452, slightly stronger than Friday’s close of 2,445/2,455.
“The key factors likely to influence the shilling’s direction are scarce liquidity and tax payments by corporates... both factors will depress dollar demand in the market,” said Robert Mpuuga, a trader at Housing Finance Bank.
After recovering from its all-time record low of 2,901 against the dollar hit last September, the shilling tumbled after a key rate cut on March 1, falling more than 8 percent to a low of 2,610 in the two sessions that followed the cut.
The Bank of Uganda maintained its new cycle of monetary policy easing this month by trimming 100 basis points from February’s rate of 22 percent despite a modest drop in inflation last month.
The policy easing is expected to sap the currency of Africa’s leading coffee exporter for the next few months as foreign investors, a key source of hard currency, exit Uganda’s debt market, on the back of falling yields.
“Interbank continued selling might also offer some support to the unit. Expected range today is 2,360- 2,460,”said a market brief from Stanbic Bank Uganda.