"(Dollar) demand has virtually dried up in the interbank market.

There's no underlying demand from businesses because of the oncoming holidays," said Shahzad Kamaluddin, a trader at Crane Bank.

The shilling has held its own against the dollar in recent days, mainly due to a seasonal rise in dollar inflows from Ugandans living abroad, amid low demand for dollars due to slowing activity at businesses ahead of the holidays.

Bank KCB Uganda said in a research note that the shilling, which is down 6.9 percent against the dollar this year, was expected "to test the 2,650 mark in the next few days."