[August 03, 2011] Shilling Slumps Again Tweet Aug 03, 2011 (New Vision/All Africa Global Media via COMTEX) -- The Central Bank sold dollars on Monday to stabilise the market after a surge in interbank demand for the greenback sparked a sharp depreciation of the local currency, a trader said. Commercial banks quoted the local currency at 2,630/2,655 against the dollar, down from 2,650/2,660 before the Central Bank's intervention. The shilling closed at 2,615/2,625 on Friday. "There was an upswing in interbank buying, which pushed the shilling sharply down before Bank of Uganda came in," said Faisal Bukenya, the head of market-making at Barclays Bank. It was not clear how much the Bank of Uganda had offloaded onto the market. On June 30, the shilling hit an all-time low of 2,710 as high dollar demand and speculative activity pushed the local currency through a series of record lows. The shilling has suffered a turbulent exchange rate much of this year as the increasing global demand for the dollar continued. The impact of the weak shilling is hitting businesses hard because pricing in shillings under such a volatile forex market is a big asking. The euro, the common currency for the European Union, has weakened of late due to economic crises in some member states such as Greece, Portugal and Spain. This is pushing investors with assets in euros to convert them into dollars, leading to the high global demand for the dollar. The high local demand for dollars by oil companies, manufacturers and multinationals paying dividends to their foreign owners against poor dollar inflows is also piling pressure on the Uganda shilling. The Central Bank promised to continue intervening in the market by selling or buying dollars, but did not intervene in the market yesterday. Analysts noted that the weak shilling was bad news to the business community since inflation was also high, jumping to 18.7% at the end of July, from 15.8% in June. [ Back To TMCnet.com's Homepage ]