KAMPALA: The Ugandan shilling weakened on Monday when banks took advantage of increased shilling liquidity to buy dollars but traders said the local currency could be supported by inflows chasing government debt.
At 0908 GMT commercial banks quoted the shilling at 2,872/2,882, weaker than Friday's close of 2,868/2,878.
"There's a lot of shilling liquidity in the interbank, which is allowing position-taking by players," said Sage Daniel Muganza, trader at Centenary Bank.
"I would say the outlook will likely be stable, mainly supported by high yields on Ugandan debt," he said.
Muganza said BoU had on Monday removed a total of 179 billion shillings worth of excess liquidity via a seven-day repo which could potentially yield support for the local currency.
The central bank or Bank of Uganda (BoU) is due to auction two- and fifteen-year Treasury bonds worth a combined 180 billion shillings ($62.74 million) this week.
Muganza said the shorter tenure was likely to draw strong appetite from offshore investors. Yields on Ugandan debt have been soaring in recent months feeding market optimism of greater offshore investor appetite and a surge in supplies of hard currency.
The shilling has lost 3.5 percent of its value against the greenback so far this year.
Faisal Bukenya, head of market making at Barclays Bank said the demand pressure on the shilling was likely fleeting and that it would play in a stable range of 2,840-2,885 this week.
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