Uganda's central bank bought an unspecified amount of dollars from the market on Thursday to contain the shilling's <UGX=> recent strength, traders said.
The shilling has gained 1.3 percent since ratings agency S&P downgraded it a notch to B last Friday, citing lower revenue growth, lack of budget support by donors and rising expenditure demands.
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| Nigeria's central bank gov, Sanusi |
In early trading, the shilling rose 2,460/65 per dollar, prompting the central bank to step in, after which it weakened to 2,485/90. It later recovered some of the lost ground.
"The gains were driven by the poor demand (for dollars) that has persisted over the last few days ," said Faisal Bukenya, head of market making at Barclays Bank Uganda.
Meanwhile, Nigeria central bank said it will continue to defend the local currency for as long as its foreign exchange reserves can support it.
The naira has been under pressure due to dollar shortage and increasing demand for the greenback by importers.
"My strong view is that a stable currency is absolutely critical for price stability and financial stability in general," Lamido Sanusi, Nigeria's central bank governor said on Thursday.
"We should continue to seek a stable exchange rate for as long as the reserves and monetary conditions can support this," Sanusi said. He is in the Swiss ski report attending the World Economic Forum.
Central bank lifted the cash reserve requirement on public sector deposits held by banks on Tuesday, seeking to stabilise the naira and reflecting its concern about loose fiscal policy ahead of elections next year.
The naira has hovers around 159.45-160 to the dollar in the last two weeks due to surge in demand and dwindling dollar supply from oil companies.
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