Uganda Central Bank Sells FX as Shilling Keeps Falling After Rate Hike

Uganda’s central bank has entered the foreign exchange market on the sell side, offering an undisclosed amount of foreign currency as the shilling continues to weaken against the U.S. dollar.

The Bank of Uganda said in a notice to banks on Thursday, Oct 22: “BOU (The Bank of Uganda) is in the FX market on the sell side.” The notice did not elaborate.

Shilling under pressure

Uganda’s shilling has been under pressure for weeks, sliding to repeated record lows against the U.S. dollar. The central bank’s move is aimed at easing the pressure on the local currency.

Rate hike failed to hold

To try to arrest the slide, the central bank hiked its main interest rate by 225 basis points to 12% last week after an emergency monetary policy meeting. The shilling recovered some ground on the day the rate hike was announced.

It then resumed its losing trend and is now trading weaker than at the time of the hike. The Bank of Uganda did not disclose the amount of foreign currency it was selling.