(Corrects scope of move in headline.)
Oct. 24 (Bloomberg) -- Uganda’s shilling rose to a five- week high against the dollar as banks increased U.S. currency sales and non-governmental organizations exchanged the greenback to meet month-end obligations.
The currency of East Africa’s third-biggest economy appreciated as much as 1.5 percent to 2,777.5 per dollar, the strongest intraday level since Sept. 20, and traded 0.8 percent up at 2,798 by 1:15 p.m. in Kampala, the capital, according to data compiled by Bloomberg. It closed at 2,820 on Oct. 21.
“We have seen interbank selling and this has been sparked off by slackened customer appetite for the dollar,” Taib Lubega, a currency trader at Stanbic Bank Uganda Ltd., said by phone from Kampala. “End-of-month conversions are trickling in from non-governmental organizations and from commodity exports, especially coffee.”
The currency has slipped almost 17 percent this year to the dollar, making it the second-worst performer in the period after Kenya’s shilling, which has fallen 19 percent. Uganda’s currency reached 2,897.50 against the dollar on Sept. 23, the weakest since June 1993, as inflation increased and as Europe’s debt crisis cut demand for riskier assets. Uganda ranks behind Ethiopia as Africa’s largest exporter of coffee, according to the International Coffee Organization.
Demand for the U.S. currency has been curbed as borrowing costs have climbed to as much as 28 percent, Lubega said.
Rates increased after Uganda’s central bank on Oct. 4 boosted its benchmark interest rate by four percentage points to 20 percent to curb inflation at an 18-year high and bolster the shilling.
--Editors: Ana Monteiro, Peter Branton
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