Oct. 4 (Bloomberg) -- Uganda’s shilling pared a second day of declines against the dollar as the central bank raised its key interest rate by four percentage points to curb inflation, which is at a more than 18-year high.
The currency of East Africa’s third-biggest economy lost as much as 0.9 percent to 2,885.50 per dollar and traded less than 0.1 percent down at 2,865 by 2:42 p.m. in Kampala, the capital, according to data compiled by Bloomberg.
The central bank raised the rate to 20 percent from 16 percent at its August meeting after the inflation rate surged to 28.3 percent in September. The interest rate was introduced in July at 13 percent.
“The announcement by the central bank rate partially helped the shilling gain,” Daniel Sage, a currency trader at Centenary Bank Ltd., said by phone from Kampala. “Tomorrow’s auction of Treasury bills has also helped attract offshore investors because the yields are attractive.”
Uganda’s central bank is offering 95 billion shillings ($33 million) of three-, six- and 12-month bills tomorrow. The yield on 91-day bills climbed to 17.412 percent at Sept. 21’s sale, the highest since at least March 2005.
Uganda’s shilling reached 2,897.50 against the dollar on Sept. 23, the weakest since June 1993, as inflation increased and on concern Europe’s debt crisis will weaken riskier assets further. The currency slipped 19 percent this year to the dollar.
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