Bloomberg News

Uganda Shilling Rebounds From Biggest Drop in 6 Weeks to Dollar

November 02, 2011

Nov. 2 (Bloomberg) -- Uganda’s shilling rebounded from the biggest drop against the dollar in almost six weeks as foreign investors bought the currency to participate in a debt sale.

The currency of East Africa’s third-biggest economy rose as much as 1.5 percent to 2,582.1 per dollar before trading 0.4 percent stronger at 2,610 by 1:19 p.m. in the capital, Kampala, according to data compiled by Bloomberg.

The nation’s central bank will today auction 95 billion shillings ($36 million) of three-, six- and 12-month treasury bills. Three-month yields were 21.049 percent at the Oct. 19 sale and 21.415 percent at the previous auction.

“The strengthening of the shilling is driven by the interests in government securities by offshore players,” Timothy Muzoora, a currency trader at Cairo International Bank Ltd., said by phone from Kampala.

The central bank yesterday raised its benchmark rate by three percentage points to 23 percent to curb inflation and bolster the local currency. The bank has boosted the rate every month since it was introduced at 13 percent in July.

Uganda’s shilling, which reached 2,897.50 on Sept. 23, the weakest since June 1993, has declined 12 percent against the dollar this year. A surge in food and fuel prices pushed annual inflation to a more than 18-year high of 30.5 percent in October from 28.3 percent in September, according to the Uganda Bureau of Statistics.

--Editors: Ana Monteiro, Peter Branton

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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