Uganda's currency sank to 4,143 per dollar late in London trading, a level not seen since Bloomberg started keeping tabs in 1993. That puts the slide since Aug. 25 - when US Treasuries began to tumble - at more than 10%, the steepest loss in a Bloomberg basket of 144 currencies.
Citigroup estimates roughly $200 million has flowed out in the past two weeks, pointing to strains on Uganda's external and budget balances. The Bank of Uganda left an email seeking details on foreign holdings of local-currency bonds unanswered.
He noted that at last week's government bond sale, most of the buying came from domestic banks and retirement funds. Kaboyo also pointed to homegrown pressures on the currency: strong corporate demand for dollars and pricier energy tied to supply disruptions from the conflict in the Middle East.
"Without a stabilization in the currency, investor confidence looks likely to remain fragile," wrote Katie Kironde, a strategist at Citigroup.
Kaboyo sees the "next testing point" at 4,150 per dollar, implying the shilling could weaken further in the near term.
Currency lows reach import prices and household budgets within weeks. Market Briefs covers frontier markets free every weekday.
JPMorgan puts Uganda's local-currency bond market at $9.4 billion and said last month it will include nine Ugandan securities in a freshly created frontier-markets bond index. The International Monetary Fund estimates Uganda holds $6 billion in foreign-exchange reserves, covering about 2.7 months of imports.
Officials are unlikely to step into the FX market after President Yoweri Museveni instructed the central bank to refrain from selling dollars. "I am totally against" the central bank governor's "proposal to squander our reserves and deploy more dollars in the market to counter the falling shilling," he was quoted as saying on Oct. 9 by local media.
That stance diverges from peers such as Zambia and Ethiopia, which have used reserves to backstop their currencies. Ethiopia said last week it intends to allocate an extra $840 million this year to bolster the birr, in addition to more than $3 billion already deployed to support it.
If you have exposure to Uganda, FX swings are doing most of the talking right now. A $9.4 billion local bond market up against around $200 million in recent outflows, rising US yields and a hands-off intervention stance can make moves feel outsized. Keep an eye on that 4,150 level Kaboyo flagged, and remember that when global rates shift, smaller markets can feel the ripple fast.
Dollar demand pressure keeps recurring across the region. Join Market Briefs free and follow the strain.
