KAMPALA: The Ugandan shilling strengthened marginally against the dollar on Monday but traders predicted expected dollar purchases by the energy sector would maintain pressure on the local currency.
At 0705 GMT, commercial banks in Kampala quoted the local currency at 2,393/2,398 to the dollar against Friday's close of 2,397/2,402.
"(Dollar) demand is low and that's what has given the shilling a bit of energy, but we don't see it lasting because we anticipate dollar purchases by the oil sector in the course of the week which will put the shilling under pressure again," said Faisal Bukenya, head of market making at Barclays Bank Uganda.
Technical analysis showed dollar resistance at the 2,410 level, with support for the greenback at 2,380, market players said.
When the shilling slid through a succession of record lows in January, the Bank of Uganda (BoU) said it would take an aggressive stance on the shilling/dollar exchange rate and pumped hard currency worth tens of millions of dollars into the market.
Last week the local currency hit a new all-time low of 2,425/2,429, but the central bank confounded market expectations and did not intervene to support the unit.
With the shilling hovering a touch under 2,400 traders predict the central bank will refrain from entering the market in the immediate future.
"I don't expect the central bank to come in because the sentiment there seems to be that the shilling is still stable," said Denis Mashanyu, a trader at Standard Chartered Bank Uganda.
Much of the dollar demand this week, he said, is expected to come from multinational companies rushing to meet deadlines for remitting 2010 dividends.
"BoU might come in only if we break through 2,420," he said.
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