We expect a more stable performance from the Ugandan shilling in 2010-11 following the large fluctuations in the currency in the wake of the global downturn. It appreciated by almost 20% during the second half of 2009, helped by a weakening of the US dollar, and has regained most of the ground that it lost during the financial crisis. This trend could continue as pressures to appreciate remain; faster economic growth and strong inflows of foreign exchange from remittances and investment (boosted by interest in the oil sector) will support the shilling. Nevertheless, these factors will be partly negated by pressure to depreciate; a widening current-account deficit will weaken the currency. Moreover, in a potential transformation of policy, the central bank suggested in December that it would intervene to limit any further appreciation of the shilling as it looks to support economic growth-a move away from its policy of intervening only to even out large fluctuations in the currency. If it does intervene, we expect any action to be limited to maintaining stability rather than forcing a depreciation. We therefore forecast an average exchange rate of USh1,891:US$1 in 2010 and USh1,829:US$1 in 2011 as higher foreign investment boosts confidence in the currency. A significant devaluation could occur if relations with donors were to worsen dramatically or if increased instability in neighbouring Sudan or the DRC were to reduce demand for exports.