By Agency Reporter

Wednesday, 16 Feb 2011

An injection of dollars into the foreign exchange market by Bank of Uganda failed to strengthen the Uganda shilling on Tuesday and a trader said its pre-election losses were likely to escalate.

The market expects the local currency to weaken towards its all-time low of 2,400 against the dollar this week as the east Africa’s third largest economy heads to a presidential election on Friday, Reuters said in a report.

At 1255 GMT, the shilling was at 2,370/75 per dollar, from 2,357/2,362 at Monday’s close.

“The central bank has been in the market but we’ve seen absolutely no impact at all. They came in when the shilling had dropped to 2,370/2,375 and there has been no change, it’s at the same level,” said Faisal Bukenya, Head of Market Making at Standard Chartered Bank, Uganda.

The central bank did not disclose how many dollars it sold and Bukenya estimated the amount at no more than $5m.

“Those with dollars are holding onto them tightly while demand is soaring and we expect the huge mismatch to continue up to elections,” Bukenya said.

Source: Punch