UGANDA, Kampala | Real Muloodi News | The Uganda Shilling weakens against the U.S. dollar as foreign exchange market dynamics shifted following a recent Treasury bond auction and changing investor behaviour, according to data from the Bank of Uganda and commercial banks.
The Uganda Shilling depreciates when its value weakens relative to a foreign currency — most notably the U.S. dollar — meaning it takes more shillings to buy the same amount of dollars. At the end of the trading week, the shilling weakened from its earlier levels, a reversal of gains it had made at the beginning of the week.
According to the Bank of Uganda, the shilling traded around Shs3,511.91 per U.S. dollar on Friday morning, with the selling rate at about Shs3,521.91. By midday, the exchange rate showed the local currency trading at approximately Shs3,525.18 for buying and Shs3,535.18 for selling, indicating the Uganda shilling depreciates further against the greenback.
Acting Head of Trading at Absa Bank Uganda, Richard Nsubuga, said early in the week the Uganda shilling depreciates after a shift in demand for the dollar. He noted that renewed offshore confidence had previously strengthened the shilling, with some market sessions seeing it trade stronger against the dollar ahead of a Treasury bond auction.
“The local currency benefited from renewed offshore confidence in the post-election outcome, alongside portfolio inflows ahead of the Treasury bond auction, which attracted strong investor interest,” Nsubuga said, referring to inflows from both domestic and international participants.
However, Nsubuga said that after the auction, offshore investors returned to the market in search of dollar positions, while other flows tied to commodity trading increased. In combination with subdued corporate demand for foreign exchange, this contributed to the Uganda shilling depreciates in value.
“Following the auction, however, offshore players — both unsuccessful bidders and those taking advantage of price dips — returned to the market,” Nsubuga explained, noting that these dynamics, along with other market flows, pressured the local currency.
Economists and traders often view the foreign exchange market as sensitive to shifts in global and domestic investor sentiment, particularly around key financial events such as government securities auctions and macroeconomic reports. Although the shilling depreciates against the dollar in this instance, Uganda’s exchange rate management framework and foreign reserve holdings provide a buffer against sharp volatility.
Uganda’s inflation remained subdued toward the end of 2025, with headline inflation reported at low levels, which can influence currency stability by affecting investor and consumer confidence. Other economic data from late 2025 showed inflation staying steady even amid seasonal and market pressures.
This week followed a period in which the local unit appreciated against the dollar due in part to portfolio inflows and offshore confidence linked to post-election outcomes. The reversal of that trend highlights the dynamic nature of foreign exchange markets, where demand for hard currencies like the U.S. dollar can shift quickly in response to investor positioning and broader economic activity.
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