Overview:
The Uganda shilling faced pressure in late January as high dollar demand from corporate buyers and offshore investors caused the currency to hit weekly lows.
KAMPALA, Uganda — The Uganda shilling faced significant pressure during the final week of January as heavy demand for U.S. dollars from offshore investors and corporate buyers reduced market liquidity.
The local currency opened the week at 3,440/3,450 against the dollar but weakened to lows of 3,610/3,620 by midweek. Traders noted that telecommunications, energy, manufacturing and transport firms led the surge in dollar purchases. The decline eventually leveled off as remittance firms and commodity exporters entered the market.
Richard Nsubuga, acting head of trading at Absa, said the shilling is expected to remain range-bound between 3,450 and 3,610 in the near term as exporter flows balance out corporate demand.
The volatility occurred alongside a decrease in yields across all tenors during the week’s Treasury bill auction. Despite the late-month slump, the shilling showed modest appreciation overall in January, starting the month at 3,623 and reaching a peak of 3,458 on Jan. 20.
In a separate report, the Uganda Bureau of Statistics announced that annual inflation rose slightly to 3.2% in January, up from 3.1% in December 2025.
Stephen Kaboyo, managing director at Alpha Capital, said the inflation data reflects a stable environment. He predicted the Bank of Uganda may cut interest rates during its first policy meeting of the year as long-term price pressures ease.
In regional markets, the Kenya shilling remained steady, trading in a range of 128.85 to 129.25 against the dollar. Market activity in Kenya was described as muted, with dealers expecting the currency to hold its current position.
Globally, the U.S. Federal Reserve maintained its current interest rates following a meeting Wednesday.