May 14, 2015 / 10:13 AM / 3 years ago

Ugandan shilling weakens on dollar demand by manufacturers

KAMPALA, May 14 (Reuters) - The Ugandan shilling weakened on Thursday after dollar demand picked up again led by the manufacturing sector firms and negative market sentiment fuelled by a fall in yields at this week’s Treasury debt sale.

At 0851 GMT commercial banks quoted the shilling at 2,992/3,002, versus Wednesday’s close of 2,985/2,995.

“We’re seeing manufacturing sector players starting to return with some appetite,” said Ahmed Kalule, trader at Bank of Africa. “There’s also a general market feeling that the debt yields’ upward run is starting to stall.”

Yields declined across all tenors at Wednesday’s Treasury bills auction by the central bank where a total of 175 billion shillings ($56 million) worth of debt was on offer.

Rates on Ugandan debt have been climbing in recent months with analysts attributing the rise to investor expectations of a surge in government spending ahead on next year’s elections.

Kalule said the government was likely starting to grow wary of taking on expensive money, which could signal both a potential downward turn in yields and offshore investor demand for Ugandan debt leading to a slow down in hard currency flows.

Faisal Bukenya, head of market making at Barclays Bank said some players in the interbank were also taking positions.

“At around 2,990 (to the dollar) players in the interbank felt it was a comfortable level to start buying ... am seeing a couple of them exerting demand,” he said.

The Ugandan shilling is now 7.5 percent weaker against the greenback so far this year.

In recent weeks the local currency has been trading around 3,000 to the dollar after recovering from a series of falls that pushed it to its all-time record low of 3,116/3,126 on March 12.

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$1 = 2,990.0000 Ugandan shillings Reporting by Elias Biryabarema; Editing by James Macharia

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