The shilling on Friday strengthened against the dollar to pre-inflation levels for the first time, trading at 2290 buying and 2325 selling.
The Pound Sterling is now at 3600 buying and 3750 selling, the Euro is buying at 3000 and selling at 3100. The Kenyan shilling is buying at 27 and selling at 28.5.
Friday’s strong shilling showing means it has appreciated against the dollar by over 600 shillings from the high of about 2950 at the peak of the high inflation about three months ago.
From 32 percent in October last year, the high inflation peaked and is now on a downward trend. In January, annual headline inflation stood at 25.7 percent, down from 27 percent in December 2011.
Stephen Mwanje, the chairman of foreign exchange dealers, told Uganda Radio Network that the appreciating shilling is causing jitters among dealers. Mwanje said this week forex bureaus have recorded few deals compared to last week and the months before.
He explained that the strengthening shilling is because most people have little or no money since borrowings from banks have declined.
Mwanje expressed worries that if the trend continues it will hurt forex bureaus more.
Stephen Kaboyo, Bank of Uganda’s director for financial markets, said the tight monetary stance that put the central bank lending rate at 22 percent for February and the attractive interests on treasury bonds makes sectors like forex and stocks less attractive.
Local and offshore demands for the Uganda Shilling increased this week after the Bank of Uganda issued 500 billion shillings for five-year treasury bonds.
To date there are 158 forex dealers in the country all competing for the little dollar inflows from exports and donors.
