Shilling extends losing streak as Dollar demand tightens FX market
Local currency weakens to the mid 3,600s as offshore demand, importer pressure, and liquidity absorption weigh heavily on the market
The Ugandan Shilling continued its downward slide this week, weakening to about Shs 3,635–3,645 per US dollar as strong demand for the greenback and tight liquidity conditions applied fresh pressure on the foreign exchange market.
Market analysts point to sustained demand from offshore investors, major importers, and corporate buyers as the main drivers of the depreciation. The domestic market has also experienced a liquidity squeeze, as the Bank of Uganda (BoU) undertook several absorption operations, including repos and BoU bills. Mopping up more than Shs 1 trillion from the money market over the week.
Recent trading data shows the USD/UGX pair briefly touching highs of Shs 3,641.50, while the 30-day average stands around Shs 3,532, indicating a steady upward push in dollar strength. The trend mirrors earlier months, when the shilling faced similar pressure due to strong import demand and global dollar dominance.
A weaker shilling raises the cost of imported fuel, machinery, pharmaceuticals, and essential raw materials, a factor that may shape price movements across various sectors. Exporters may benefit when converting dollar earnings back into shillings, though many still face elevated input costs.
Traders say the currency is likely to remain under pressure in the short term, with movements expected to depend heavily on dollar inflows, global market shifts, and BoU’s liquidity interventions.
