KAMPALA: The Ugandan shilling was flat against the dollar on Monday, with trading activity slow ahead of Tuesday's public holiday, but traders said the shilling was still vulnerable this week due to waning inflows from investors in Ugandan debt.
At 0840 GMT commercial banks quoted the shilling at 2,565/2,575, the same level it closed on Friday.
The east African country will be celebrating its 50th independence anniversary on Tuesday.
"The outlook for the shilling is still weak and that's mainly because demand for dollars outstrips supply since offshore investors in Ugandan debt are dropping off," said Denis Mashanyu, trader at Standard Chartered Bank.
Mashanyu said the shilling was likely to oscillate between 2,555 and 2,590 this week but inclined towards the weaker side.
Monetary easing by the central bank has been eroding foreign demand for Ugandan debt instruments, weakening the local currency.
Helped by slowing inflation, Bank of Uganda cut its benchmark rate this month to 13 percent from September's 15 percent, the fifth cut in a row, as it struggles to lower the cost of credit and spur an economic recovery.
The central bank is due to auction five-year Treasury bonds worth 100 billion shillings on Wednesday, and traders say the level of offshore uptake, if any, might help give the shilling direction.
"Dollar demand is weak today because of the holiday tomorrow which I think explains the stability of the shilling," said Faisal Bukenya, head of market making at Barclays Bank Uganda.
"But market confidence in it (shilling) remains low on account of weak inflows from offshore investors against high demand from importers."
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