Ugandan shilling stable, rates in focus after inflation fall

By Elias Biryabarema The Ugandan shilling was stable on Friday in subdued trade as investors pondered the next interest rate move after a fall in inflation, with demand for U.S. dollars also held back by a retailers' strike.

At 1015 GMT commercial banks quoted the currency of the third largest economy in the East Africa region at 2,588/2,598 to the U.S. dollar, unchanged from Thursday's close.

The statistics office said that Ugandan inflation fell to 3.4 percent in June from May's 3.7 percent. Core inflation dipped to 5.5 percent but remains above a target of 5 percent.

Central bank policymakers meet on Tuesday to decide on the benchmark rate, which is now at 11 percent.

"Traders are trying to figure out how the central bank will react to the inflation data so they aren't taking positions," said Century Bank trader Sage Daniel Muganza, who said he expected the bank to hold rates.

Demand for dollars has also been reduced since some shopkeepers in the capital Kampala decided to close on June 25 in protest at a new government regulation demanding imports be subject to pre-shipment inspections. Some have stayed shut.

Stephen Kaboyo, managing director at Alpha Capital Partners, said tax payments for the year to end of June could also limit demand for dollars.

"The seasonal end-of-month conversions could also lend some support (to the shilling)," he said. "Trading levels are expected in the range of 2,575/2,595."

Source: http://news.yahoo.com/ugandan-shilling-stable-rates-focus-inflation-fall-132310661.html

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