KAMPALA: The Ugandan shilling was stuck in a rut on Monday amidst sluggish market activity, although likely inflows from offshore investors participating in a scheduled Treasury auction could give it a strengthening bias.
At 1037 GMT, commercial banks quoted the shilling at 2,602/2,612, unchanged from Friday's close.
"Inflation is continuing to ease so I think there's real good value especially in the two-year bond," said Benon Okwenje, trader at Stanbic Bank. "We may see some offshore demand ... so the bias for the shilling might be on the strengthening side."
Okwenje said the shilling was likely to oscillate in the 2,595-2,610 range in the course of the week.
This week the central Bank of Uganda (BoU) is scheduled to sell re-opened two-year and new 15-year Treasury bonds worth 180 billion shillings ($69.15 million).
Traders say attractive yields on the Ugandan debt are a potential source of cushion for the local currency that might face pressure in the medium-term from importers buying greenbacks to ship in merchandise ahead of the December shopping season.
Uganda's year-on-year headline inflation declined last month to 3.1 percent from the previous month, extending a downward inflation trend that has prevailed since April.
Isaac Iga, chief dealer at Orient Bank, said the shilling's bullish bias was also being driven by looming mid-month tax payments which typically depress appetite for the hard currency.
"Much of the shilling liquidity will be set aside for tax payments ... we don't anticipate much demand from big firms," he said.
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