KAMPALA: The Ugandan shilling weakened against the dollar on Tuesday, giving up some of its recent gains due to a pick-up in demand for dollars from commercial buyers.
At 0921 GMT commercial banks quoted the shilling at 2,605/2,615, weaker than Monday's close of 2,597/2,607.
"The shilling is being weighed down by demand from mainly manufacturing, telecoms and energy firms," said Faisal Bukenya, head of market making at Barclays Bank.
"These corporates have been out of the market but now they think the dollar is at a good level for buyers," he said.
Bukenya said the shilling was cushioned from further losses by some liquidity tightness in the market.
Most companies have stayed out of the market in the last two days as they had to reserve a portion of their local currency holdings to pay their mid-month taxes.
Shahzad Kamaluddin, a trader at Crane Bank, said banks were also buying dollars when the shilling hit the 2,600 level to the dollar after days of sell-offs left them short.
The shilling has fallen 3.3 percent against the dollar so far this year, but traders say its medium-term outlook is firm, helped by favourable credit ratings and improving relations between the east African country and western donors.
On Friday ratings agency Fitch affirmed the east African country's credit rating at B with a positive outlook, citing strong average economic growth of 5.5 percent for the last five years and sound macroeconomic policies.
The shilling is also seen stronger after a court overturned an anti-gay law that drew Western criticism and halted aid payments.
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