KAMPALA: The Ugandan shilling weakened on Wednesday under pressure from manufacturers and banks buying dollars, but traders said higher Treasury bills yields would help cushion the currency.
At 0846 GMT commercial banks quoted the shilling at 2,610/2,620, weaker than Tuesday's close of 2,605/2,615.
"There was pressure in the market mainly from manufacturers and some banks who wanted to cover short positions," said Isaac Iga, chief dealer at Orient Bank. "Most speculation, though, is on what will come out of the auction... if rates go up we will see a recovery."
Bank of Uganda was due to issue results of a Treasury bill auction later on Wednesday, where a total of 145 billion shillings ($55.77 million) worth of debt is up for sale.
Iga said there was market speculation that the recent increases in yields may have peaked, which could curb demand from offshore investors for Ugandan debt.
At the last auction on September 3, the 91- and 364-day tenors fell, but the 182-day rose by more than 70 basis points.
Ahmed Kalule, a trader at Bank of Africa, said fuel importers were also looking for dollars. And now that companies have paid their taxes, more local currency was available in the market, leading to dollar buying.
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