KAMPALA: The Ugandan shilling fell for a second session on Monday, weighed down by dollar demand from importers, with the weakening seen as likely to persuade the central bank to keep interest rates on hold on Tuesday.
At 0942 GMT commercial banks quoted the shilling at 2,673/2,683, weaker than Friday's close of 2,667/2,677.
"We're seeing a continuation of appetite from importers," said Centenary Bank trader Sage Daniel Muganza.
Muganza said liquidity in the interbank market was tightening after Bank of Uganda conducted a seven-day repo on Monday and that the tightness could provide a cushion for the local currency.
Traders say importers are purchasing huge amounts of hard currency to pay for goods shipments ahead of holiday shopping at the end of the year.
The local currency has lost 5.7 percent against the dollar this year.
Stephen Kaboyo, managing director at Alpha Capital Partners, said the shilling's accelerating depreciation was likely to encourage the Bank of Uganda to keep its policy interest rate unchanged despite low inflation and below-potential economic growth.
Bank of Uganda is due to announce its benchmark Central Bank Rate for October and November on Tuesday.
"With a very shaky outlook on the exchange rate, BoU may stay action in order to avoid the risks of pushing the UGX/USD pair higher (weaker)," Kaboyo said in a market note.
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