Uganda's shilling kept rallying Thursday, extending a rebound sparked by the Bank of Uganda's biggest interest rate move since 2011. By late afternoon in London, it was trading at 4,043 per dollar, a 0.8% gain on the day that put it at the top of Bloomberg's Africa currency board among 23 peers.
The jump followed a 225 basis point hike to 12% on Wednesday and what traders suspected were central bank dollar sales. Stephen Kaboyo, who runs Kampala-based Alpha Capital Partners, said the combination of the rate move and foreign exchange operations underpinned the strength, estimating the bank could have supplied up to $30 million to the market. Absa Group Ltd's Uganda unit's head of trading, Richard Nsubuga, also said the central bank had stepped in.
The Bank of Uganda did not immediately respond to questions about any currency market action. On Wednesday, Governor Michael Atingi-Ego said Uganda's exchange rate was still set by the market, and that the central bank may intervene with its policy tools to ease bouts of volatility.
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A firmer shilling and a 12% policy rate can quickly ripple through anything tied to Ugandan cash flows, from local borrowing costs to returns on Uganda-linked holdings. If you are exposed to Ugandan assets or dollar obligations in the region, a shift like this can change how your currency and rate risk show up in performance.
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