KAMPALA: The Ugandan shilling extended gains for a second straight day on Tuesday, buoyed by a liquidity mop-up by the central bank and dwindling dollar demand from companies.
At 0916 GMT commercial banks quoted the shilling at 2,753/2,763, stronger than Monday's close of 2,765/2,775.
Some traders said commercial banks were also unwinding their long dollar positions due to the low demand for the greenback, helping fuel a bullish tone for the local currency.
Sage Muganza, trader at Centenary Bank, said the shilling's strength was mainly coming from the action by central bank on Monday to mop-up 392 billion shillings ($142.03 million) in the money market through a repurchase agreement.
Mop-ups of excess liquidity make it costlier for banks to hold large greenback positions.
"Considering there's an auction this week which will take out more shillings I see more gains going forward," he said.
The central bank is due to auction re-opened 2- and 15-year fixed coupon Treasury bonds worth a total 180 billion shillings.
The shilling is 8.4 percent weaker against the dollar so far this year, driven lower largely by demand for dollars from importers and foreign-owned companies paying dividends abroad.
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