KAMPALA: The Ugandan shilling eased on Wednesday, weighed down by dollar demand from firms in the manufacturing and energy sectors but was expected to trade stable amidst a squeeze in liquidity.
At 0933 GMT commercial banks quoted the shilling at 3,002/3,012 from Tuesday's close of 3,000/3,010.
"Players in the manufacturing and energy (sectors) are coming in with demand appetite and pushing the shilling a bit lower," said Ahmed Kalule, trader at Bank of Africa.
Kalule said there was also some limited dollar demand from some commercial banks covering short positions.
The local currency has lost 7.8 percent of its value against the greenback so far this year.
Despite central bank's tightening of its policy stance last week, traders expect the shilling to remain relatively bearish in the coming months partly undermined by jitters about the country's deteriorating current account deficit.
The Bank of Uganda (BoU) raised its key Central Bank Rate to 12 percent from 11 percent to forestall a rise in core inflation fuelled by the shilling's depreciation.
Sage Muganza, a trader at Centenary Bank, said BoU's Treasury bill auction on Wednesday was likely to squeeze liquidity conditions in the interbank and keep the shilling fairly stable in the remaining part of the week.
A total of 175 billion shillings ($58 million) worth of Treasury bills of all tenors were up for sale at the auction.
"Already there's some tightness in the market," he said.
"The auction will remove more shillings ... we could see the shilling stabilise around 3,000 level," he said.
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