KAMPALA: The Ugandan shilling firmed on Monday, buoyed by slack dollar demand and inflows of the U.S. currency from commodity exporters but was seen weakening after central bank injected local currency liquidity.
At 0927 GMT commercial banks quoted the shilling at 2,988/2,998 to the dollar, stronger than last Thursday's close of 3,000/3,010.
The markets were closed for holidays on Friday and Monday.
"(Dollar) demand is generally sluggish as activity is slowly taking off after the holiday, however we also have some conversions by commodity exporters," said Isaac Iga, chief dealer at Orient Bank.
Uganda is Africa's largest exporter of coffee, and also ships tea, tobacco and fish.
The shilling is 7.3 percent weaker against the greenback so far this year and much of the pressure has been exerted by strong corporate demand and a globally strong dollar.
Ahmed Kalule, trader at Bank of Africa said the central bank, Bank of Uganda (BoU), had injected an unspecified amount of shillings into the interbank via a reverse repo on Tuesday, which could lead to increased demand for dollars.
"There has been a squeeze in liquidity but it has eased a bit after this (cash) injection. I would say the outlook suggests a weaker local unit," Kalule said.
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