KAMPALA: The Ugandan shilling lost ground against the dollar on Monday, hurt by banks buying greenbacks to shore up positions after the local currency posted better-than-expected gains last week.
At 0924 GMT commercial banks quoted the shilling at 3,430/3,440, weaker than Friday's close of 3,380/3,390.
"We're having what you would call a self-correction, it's all driven by interbank buying," said Benon Okwenje, a Kampala-based trader at Stanbic Bank.
The shilling, down 19.3 percent against the dollar this year, posted major gains last week due to subdued corporate dollar demand and healthy inflows from offshore investors looking to tap Uganda's high-yielding debt.
Traders also cited the central bank's ongoing monetary policy tightening cycle, which they said had lifted the cost of local currency funds, as lending support to the shilling. Bank of Uganda's central bank rate (CBR) now stands at 17 percent after being increased by 600 points this year.
A market note from Bank of Africa said the shilling had weakened on Monday "due to the global expectations for the Fed (Reserve) to increase interest rates."
The note said appetite for the greenback was expected to remain elevated "as corporates rush to book US dollar positions before levels close to 3,500 come into play."
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