KAMPALA: The Ugandan shilling weakened on Wednesday after an injection of local currency liquidity by the central bank eased scarcity among commercial banks.
At 0851 GMT commercial banks quoted the local currency at 2,855/2,865, weaker than Tuesday's close of 2,845/2,855.
Ahmed Kalule, trader at Bank of Africa said tight shilling liquidity in recent trading sessions had pushed up rates for overnight and one-week funds in the interbank market.
"The central bank came in with a reverse repo to ease the scarcity and after that we saw a surge in interbank demand (for dollars)," he said.
The shilling has lost about 3 percent against the dollar this month, partly due to dollar demand from commercial banks who were stocking up on greenbacks on fears the United States would imminently hike interest rates.
Speculative activity has also been fingered by the central bank which has sold hard currency five times this month to try to tame demand and slow the shilling's depreciation momentum.
A trader at a leading commercial bank said the market could also take cue from the yields returned at an auction scheduled for Wednesday.
"If the rates maintain their upward trajectory, it might signal a surge in offshore interest," he said.
A total of 180 billion shillings ($63.05 million) worth of two and ten-year bonds are up for sale.
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