AMPALA: The Ugandan shilling held steady against the dollar on Tuesday, with traders expecting the local currency to be supported by off-shore investors at this week's Treasury Bond auction.
At 10.48 GMT, the shilling traded at 2475/2485 to the dollar, unchanged from Monday.
Uganda's central bank will on Wednesday sell 2 and 5-year Treasury bonds worth a total of 100 billion shillings ($40.32 million), with yields expected to edge down, mirroring an ongoing monetary policy easing cycle.
Traders say Ugandan government bond auctions will continue to woo offshore investors even though yields have declined.
"The outlook for shilling isn't that worrying while at the same time mature economies are in crisis, so Ugandan bonds will continue to appear attractive unless yields fall to single digit levels," said Rakesh Jha, trader at Bank of Baroda.
The re-opened 2-year bonds carry a fixed interest rate of 10 percent while the 5-year bonds offer a 1 0.75 percent coupon.
Foreign investors, whose uptake of Ugandan debt partly props up the local currency, held a total of 849 billion shillings worth of Ugandan Treasury securities as at the end of last month, up from 135 billion shillings in June 2011, according to the central bank.
Investor fears that a rollback of Bank of Uganda's benchmark Central Bank Rate (CBR) would undermine the shilling are yet to materialise with the shilling floating in a stable range of 2,460-2,500 against the greenback for the past three months.
The CBR now stands at 17 percent after being trimmed for a third consecutive month, having been as high as 23 percent this year.
"The short term outlook will remain stable for the shilling but depreciation risk is definitely there when banks start to lower lending rates," said Robert Mpuuga, trader at Housing Finance Bank.
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