Bloomberg News

Uganda Shilling Slips for 2nd Day on Euro Debt, Oil Import Buys

September 28, 2011

Sept. 28 (Bloomberg) -- Uganda’s shilling slipped for the second day against the dollar as companies bought the U.S. currency on concern Europe’s debt crisis will weaken riskier assets further and as oil importers paid for supplies.

The currency of East Africa’s third-biggest economy depreciated 0.2 percent to 2,855 per dollar by 2:18 p.m. in the capital, Kampala, according to data compiled by Bloomberg.

Euro-area governments are withholding approval of the next loan installment under Greece’s first bailout until the group of officials from the International Monetary Fund, the European Central Bank and the European Commission rules whether Greece is meeting debt-reduction terms under the program. The next tranche of aid is due in October.

“We are seeing some demand for the dollar coming through in the market because of problems attributed to the euro zone,” Ahmed Kalule, the head of currency trading at Bank of Africa Uganda Ltd., said by phone from Kampala. “People are turning to the dollar as the safest currency, while some demand is coming from the energy sector.”

Uganda’s shilling reached 2,897.50 against the dollar on Sept. 23, the weakest since June 1993. The currency slipped 19 percent this year to the dollar, making it the second-worst performer after Kenya’s shilling. A surge in food and fuel prices pushed inflation to an 18-year high of 21.4 percent in August from 18.8 percent in July, the Uganda Bureau of Statistics said on Aug. 31.

The currency appreciated 1.6 percent in the two days through Sept. 26.

“People are seeing these rates as good enough to buy the dollar after the shilling gained in the last few days,” Benon Okwenje, the head of currency trading at Stanbic Bank Uganda Ltd., said by phone from Kampala.

--Editors: Ana Monteiro, Linda Shen

To contact the reporter on this story: Fred Ojambo in Kampala at fojambo@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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