At 1131 GMT commercial banks in the capital Kampala quoted the currency of east Africa's third-largest economy at 2,655/2,665, stronger than Friday's close of 2,665/2,675.

"We have inflows from people coming in for holidays and then NGOs are doing conversions here and there as they close their books for the year," said Denis Mashanyu, trader at Standard Chartered.

"These conversions will keep the shilling biased on the stronger side up to year-end but thereafter the shilling will come under pressure again."

The local currency, which has lost 6.7 percent against the dollar this year, is forecast by money market analysts to remain bearish in the medium term, in part sapped by a loose monetary policy.

The Bank of Uganda, the country's central bank, this month extended its policy loosening cycle by cutting its key lending rate to 12 percent from November's 12.5 percent.