Uganda shilling up vs dlr after rate held steady

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The Ugandan shilling edged up against the dollar after the central bank left its key lending rate unchanged earlier in the day and traders expected the local currency to maintain its upward momentum into next week.

Bank of Uganda said it would maintain its key Central Bank Rate at 23 percent in December, unchanged from last month.

At 1210 GMT, commercial banks quoted the shilling at 2,520/2,530, stronger than Thursday’s close of 2,535/2,545, Reuters reports.
“With inflation falling, we do expect inflows into the general economy from investors to improve,” said Denis Mashanyu, a trader at Standard Chartered Bank
“Yields on government securities are likely to remain high since the CBR has been maintained at it’s current high level.”

Uganda’s headline inflation slowed to 29 percent year-on-year in November from a revised 30.4 percent the previous month.

Central bank said its tightening cycle since August helped strengthen the shilling from its Sep. 23 record low of 2,901.

The local currency has recovered 13 percent of its value against the dollar since its record low but it’s still 7.3 percent down in the year to date.
“Corporate demand has been low in recent weeks because of the general economic slowdown… we also expect strong foreign interest in next week’s bond auction and all this should give support to the shilling,” said a trader at a leading commercial bank.

Central bank is scheduled to hold a two-year Treasury bond auction next week to raise 95 billion Shillings ($37.48 mln). The bond has a coupon rate of 10 percent.

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