uganda-hsillingKAMPALA: The Ugandan shilling was little changed against the dollar in thin trading on Monday but traders said it was likely to weaken later this week, weighed down by possible dividend payouts and greenback demand from manufacturing and oil sectors.

The shilling went into steep decline this month after the central bank cut its benchmark rate by 100 basis points to 21 percent despite inflation of above 25 percent. It touched a 2012 low of 2,620 against the dollar on March 6.

At 0849 GMT commercial banks quoted the currency of east Africa's third biggest economy at 2,475/2,485, slightly stronger than Friday's close of 2,478/2,488.

Robert Mpuuga, a trader at Housing Finance Bank, said trading activity was low on Monday.

"But the shilling carries a depreciation risk this week because we expect heavy (dollar) demand as foreign companies pay last year's dividends," he said.

Analysts say the shilling is expected to remain under pressure as offshore investors shun Uganda's low-yield debt market, removing a key source of hard currency for the prospective top-50 crude producer.

Yields have declined since the central bank launched a new cycle of monetary policy easing in February, with the 91-day paper rate coming in at 17.2 percent at the last auction on March 7, from 19.5 percent at the previous sale.

BoU is expected to sell Treasury bills of all tenors worth 110 billion shillings ($44.35 million) on Wednesday.

"We're expecting some demand from the manufacturing and oil sectors which will put pressure on the shilling this week," said Ahmed Kalule, a trader at Bank of Africa.

Copyright Reuters, 2012

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