KAMPALA: The Ugandan shilling was stronger on Monday after commercial banks unwound long dollar positions due to sluggish dollar demand and the local currency was expected gain further from a mop-up of excess liquidity by the central bank.
At 0952 GMT commercial banks quoted the shilling at 2,765/2,775, stronger than Friday's close of 2,775/2,785.
"Some players who had taken long positions are now trimming them because (dollar) demand is weak," said Isaac Iga, a trader at Orient Bank.
"The central bank has also done a repo (repurchase agreement) which might also provide a bit of support for the shilling."
Bank of Uganda had not yet announced how much shillings it had removed from the market. By mopping up liquidity, the bank makes it relatively costlier to hold onto long dollar positions, which in turn helps strengthen the shilling.
The local currency weakened in recent months, largely on the back of strong importer dollar demand and some foreign-owned corporates looking to pay 2014 dividends to their shareholders.
The shilling is now 8.8 percent weaker against the greenback so far this year and it is expected to continue trading on a weak footing for the remaining part of 2014, traders said.
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