June 29 (Bloomberg) -- Uganda’s shilling dropped to an 18- year low on increased demand for dollars by companies and interbank traders, the central bank said, as bid-offer spreads on the currency widened amid increased volatility.
The shilling weakened as much as 2.1 percent and was trading 1.9 percent lower at to 2,680 per dollar at 4:05 p.m. in Kampala, the capital. It closed at 2,630 yesterday.
“There is a lot of demand from the corporate sector and in the interbank market,” Elliot Mwebya, a spokesman for the Bank of Uganda, said in a phone interview from the city.
Yesterday, the currency fell on speculation that central bank Governor Emmanuel Tumusiime-Mutebile had resigned, Deputy Governor Louis Kasekende said in an interview today in Kampala. The bank denied the rumor.
The Ugandan shilling is the world’s third-worst performing currency this year, after Suriname’s dollar and the Maldives rufiyaa, according to Bloomberg data. The currency has depreciated as inflation surged to a 17-year high of 16 percent in May amid increasing food and fuel prices.
The gap between bids and offers on the shilling widened to 50 shillings from the usual 5 shillings, said Benon Okwenje, a currency trader at Stanbic Uganda Ltd.
“The volatility in the market has led to the widening of the spread,” he said. “Right now we are looking at a level of 2,635 shillings on the buy and 2,685 shillings on the offer.”
Uganda is scheduled to become an oil producer next year when Tullow Oil Plc is expected to start pumping crude and gas from the Lake Albert Basin. The country has an estimated 2.5 billion barrels of oil, with about 1 billion barrels in proven reserves, according to Tullow.
--Editors: Paul Richardson, Ana Monteiro.
To contact the reporter on this story: Fred Ojambo in Kampala via Nairobi at firstname.lastname@example.org.
To contact the editor responsible for this story: Paul Richardson at email@example.com.