KAMPALA: The Ugandan shilling lost ground on Monday, undermined by dollar demand from the manufacturing and energy sectors.
Traders said they anticipated the local currency to weaken further against the dollar this week, on a surge of month-end demand for the US currency by importers.
At 0915 GMT commercial banks quoted the shilling at 2,950/2,960, weaker than Friday's close of 2,940/2,950.
"We have clients from the manufacturing and energy sectors exerting demand," said Ahmed Kalule, trader at Bank of Africa.
"Liquidity in the market has also improved... there's interbank demand activity although limited."
A biting scarcity of the local currency last week helped strengthen the shilling although the central bank, Bank of Uganda (BoU), has since eased the liquidity tightness by allowing banks to borrow from it.
Ahmed said the shilling's outlook was still bearish and that only the central bank's aggressive sell-offs of hard currency was helping limit the depreciation pressure. The bank has sold dollars into the money market ten times since January.
The shilling is now 6.1 percent weaker against the dollar so far this year.
Ali Abbas, a trader at Crane Bank, said the shilling would likely post further losses in the coming days.
"I think there's still appetite by corporates looking to pay dividends and the normal-end of month demand," he said.
Manufacturers normally exert demand at the end of every month, buying greenbacks to stock up on raw material imports.
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