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imageKAMPALA: The Ugandan shilling weakened further to a three-year low on Thursday on increased dollar demand by energy and manufacturing firms, traders said.

At 1201 GMT commercial banks quoted the shilling at 2,750/2,760, weaker than Wednesday's close of 2,725/2,735, levels last seen in October 2011.

"Demand is very strong from manufacturing and energy buyers," said Shahzad Kamaluddin, trader at Crane Bank.

"However the market is also so high in liquidity... banks are drawing down on this to build dollars positions," he said referring to increased local currency liquidity in the money market after the government settled pending bills.

Traders said the central bank sought to mop up excess liquidity on Thursday, the third day this week that the bank has sought to do so. Excluding Thursday, the bank has so far soaked up a total of 500 billion shillings ($182.35 million).

Sage Daniel Muganza, trader at Centenary Bank, said the market was low on hard currency supplies as this week's Treasury bill auction worth 145 billion shillings.

Kamaluddin said the shilling's bearish tone was also tracking the greenback's trend in other markets where the greenback has surged against other currencies.

Copyright Reuters, 2014

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