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Ugandan shilling slides on aid cut fears over anti-gay law

Source: Reuters - Wed, 26 Feb 2014 11:08 GMT
Author: Reuters
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(Adds details, comment from traders) By Elias Biryabarema KAMPALA, Feb 26 (Reuters) - The Ugandan shilling weakened more than 1.8 percent on Wednesday on fears of more aid cuts by Western donors over a law that toughened punishments for gays, while demand for dollars by importers added to pressure. At 1042 GMT, the east African nation's currency traded at 2,503/2,013, slipping from Tuesday's close of 2,453/2,458, after Norway and Denmark said this week they would hold back donations and other donors said they were reviewing aid. "Players in the interbank market are exerting a lot of demand pressure mostly because of concerns over news of aid cuts in relation to the anti-gay law," said Faisal Bukenya, head of market making at Barclays Bank, adding that some investors may also have felt they had oversold dollar positions in past weeks. The United States, a major donor, condemned the law that punishes a range of homosexual offences with lengthy jail terms and imposes life imprisonment on perpetrators of so-called "aggravated homosexuality". It said it was reviewing relations. Washington provides more than $400 million in assistance to Uganda each year, mainly in health. Sweden's finance minister, Anders Borg, said the new law "represents a financial risk" for Uganda. Foreign aid is a key source of hard currency for Uganda and hurt a vital source of dollars. The currency was also under pressure from importers. "We're seeing significant recovery in demand by importers," said Sage Daniel Muganza, trader at Centenary Bank. "It's also adding to the pressure." Muganza said if the sharp depreciation continued for a second day, the Bank of Uganda, or central bank, could step in. UGX Spot Rate.................... Ugandan Shilling Money Guide.... Calculated Cross Rates.......... Deposits..................... Deposits & Forwards............. Uganda Equities Guide....... Uganda All Share Index........ Shilling background ..... Ugandan Debt Guide............ All Uganda Bonds............. Uganda T-Bills.............. Uganda Benchmark............. Central Bank ................ Ugandan Contributor Index.... Uganda Coffee Prices....... (Writing by Edmund Blair; Editing by Richard Lough)

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