KAMPALA (Reuters) - The Ugandan shilling was unchanged on Friday but the market outlook was bearish for next week, with expectations of strong dollar demand from more offshore investors looking to bale out of emerging market assets.
At 1108 GMT commercial banks in Kampala quoted the currency of east Africa's third-largest economy at 2,595/2,605 against the dollar, unchanged from Thursday's close.
"I would expect the offshores (investors) to be selling EM (emerging market) debt and for our case may be selling bonds and buying dollars ... so the shilling is not cushioned from that," said Thaib Lubega, a trader at Stanbic Bank Uganda.
However, he said corporations needing shillings to pay their annual tax bills could lend some support to the currency as they were "likely to put some pressure on the shilling liquidity."
Traders see the exchange rate oscillating in the 2,575-2,620 range next week.
Emerging market assets, which have been a major beneficiary of the cheap cash pumped out by major central banks, sold off after the U.S. Federal Reserve signalled on Wednesday that it would begin to slow the pace of monetary expansion later this year.
Money market analysts say the medium and long-term outlook for the shilling is weak, with the potential impact of a key rate cut by the central bank also weighing on market confidence.
After leaving the benchmark Central Bank Rate (CBR) unchanged for five straight months at 12 percent and keeping the local currency largely stable, the central bank this month cut it to 11 percent, citing a need to stimulate consumer spending and spur growth.
An import-dependent country, a recovery in consumer spending in Uganda would drive up its import bill and spur a surge in demand for hard currency and pressure the shilling.
"We'll probably see great interbank buying as players prepare for the huge demand from offshore people in the coming days in the wake of the Fed decision," said Faisal Bukenya, the local head of market-making at Barclays Bank.
Source: http://news.yahoo.com/ugandan-shilling-steady-despite-bearish-outlook-160133453.html
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