The shilling closed at a record low on Wednesday, a week after the Bank of Uganda raised its benchmark rate by 225 basis points.
Driving the news: The Bank’s closing mid-rate put the dollar at Shs4,208.10. Absa quoted the interbank market at Shs4,205/4,215, from an opening range of Shs4,180/4,190.
Why it matters: The dollar’s rise has continued despite the rate increase. Absa attributed Wednesday’s move to corporate dollar demand, particularly from importers and energy-sector companies, against limited hard-currency inflows.
By the numbers:
- The dollar closed at Shs3,951.05 on 14 October, the day of the rate decision. Wednesday’s Bank rate was 6.5 per cent higher.
- Money-market conditions remained tight, Absa said, with overnight and other short-term rates trading between 12.0 per cent and 12.5 per cent.
- Treasury-bill yields rose across all maturities. The 91-day yield cleared at 11.249 per cent, while the 182-day and 364-day bills cleared at 13.400 per cent and 14.499 per cent.
- The auction accepted Shs372.6bn in face value, above the Shs350bn offered.
The big picture: The rate rise has raised shilling funding costs and Treasury yields, but it has not yet eased the imbalance between demand for dollars and their supply.
The caveat: The Bank has not said whether it has sold dollars since 14 October. The available market data do not show whether official intervention occurred on Wednesday.
($1 = Shs4,208.10, Bank of Uganda closing mid-rate, 21 October)
