The local currency, that had held a steady position around 3425/3435 the previous week, succumbed to renewed pressure as offshore players appeared back in the market with a newly fresh dollar demand.
The currency described is the Ugandan shilling (UGX), which weakened against the US dollar in mid-October 2025.
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Possible factors that might have led to the weakening of the Ugandan shilling included:
- Renewed offshore demand: The primary cause of the pressure on the shilling was the return of offshore investors to the market with a strong demand for US dollars.
- Local bank participation: After offshore investors began buying dollars, local banks reportedly joined the rush, further intensifying the shilling’s decline.
- Central bank intervention: To counter the instability, the Bank of Uganda had to intervene in money markets. One report mentioned it mopped up liquidity to keep rates in check during the week the shilling weakened.
- Foreign exchange market activity: Trading data shows that leading up to the weakness, foreign exchange transactions had been increasing, pointing to growing market depth and activity.
Exchange rate shifts included:
- The Ugandan shilling weakened from trading around 3425/3435 UGX per US dollar to 3490/3500 UGX per US dollar by October 19, 2025.
- The market sentiment was that the shilling could fall further if dollar-buying pressure continued.
