Overview:
Uganda's local currency is on a path to recovery as political risks subside following the general elections. Analysts say increased dollar supply and measured corporate demand are driving the shilling's appreciation, offering relief to the country's importers.
KAMPALA, Uganda — The Ugandan shilling has recorded fresh gains in post-election trading, supported by renewed market confidence and steady inflows that have reversed months of currency pressure.
The local unit appreciated during Thursday’s trading session, opening at 3,443.18 per dollar and strengthening to close at 3,437.73. The shift marks a significant recovery from late last year, when the shilling weakened beyond the 3,700 mark amid election-related uncertainty and high dollar demand.
Market analysts attributed the turnaround to a reduction in political risk and improved sentiment in the foreign exchange market.
Post-election trading saw sustained dollar selling interest, which pushed the spot market to a sharp single-day strength of the shilling, said Stephen Kaboya, managing partner at Alpha Capital.
Kaboya noted that while the supply of dollars has improved, demand from corporate players and import-dependent firms remains measured. Many market participants had previously taken defensive positions or held back supply due to precautionary concerns ahead of the polls.
Our reading of the market is that the real test of the shilling post-elections has come to pass, Kaboya said. He added that market forces are now in control with a low likelihood of political events disrupting economic activity.
The currency is expected to trade between 3,480 and 3,500 in the near term. The current average trading rate of 3,477.77 highlights the pace of the recovery compared to the volatility seen in December.
The stronger shilling offers relief to importers who faced elevated bills during the earlier depreciation. However, analysts warned that global factors, including fluctuating commodity prices and external interest rate movements, could still influence the currency’s path.
Financial experts say that if foreign inflows remain consistent and domestic demand stays disciplined, the shilling is likely to maintain its current gains and remain on firmer footing as market confidence continues to rebuild.