Uganda shillings weakens

December 14, 2021 5:50 PM

The Uganda shilling has taken a hit and has thus weakened closing at lows of 3555/3565 from the day’s opening of 3550/3560.

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According to financial experts and traders, this fall in the shilling is occasioned by several factors, namely impacts from interbank and corporate demand for hard currency in the context of a quiet trading day.

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All told, money markets have remained consistently liquid according to Absa Trading with overnight yields at averages of 6.50%.

Experts say such currency fluctuations are a natural outgrowth of floating exchange rates, and so not a cause for any alarm.

That said, a currency's exchange rate is typically determined by the strength or weakness of the underlying economy and that the Ugandan shilling is susceptible to the impacts on the economy that factors like Covid-19 have caused.

Still, a weaker shilling will have a positive impact on the nation's imports and exports. In general, a weaker currency makes imports more expensive, while stimulating exports by making them cheaper for overseas customers to buy. This means for Foreign Exchange for the country.

However, this marginal dip in the shilling is not likely to have an appreciable effect on the country’s terms of trade unless it continues to fall.