At 0741 GMT commercial banks in Kampala quoted the shilling at 2,340/2,350, firmer than Wednesday's close of 2,360/2,370. Thursday was a holiday in Uganda.

"Today is settlement day for Wednesday's Treasury bill auction, so successful offshore bidders are converting dollars to pay up," said Dennis Mashanyu, a trader at Standard Chartered Bank.

"Plus there's a bond auction next week ... all this is supporting a shilling rally."

Dennis, though, said the shilling's rally might start to slow down in the coming days as foreign-owned firms, seeking to pay 2011 dividends, start to buy dollars.

Traders and Bank of Uganda (BoU) say a rush by offshore investors into Ugandan debt has helped the shilling consolidate its recovery from a record low of 2,901 hit last September.

The yield on 91-day paper climbed to 23.4 percent at Wednesday's auction, from 22.8 at the last auction.

BoU is also due to auction a five-year 95 billion shilling ($40.3 million) Treasury bond on Wednesday. The bond has a coupon rate of 10.75 percent.

"The next resistance level for the shilling is 2,340 with a breach of that level indicating that the shilling may strengthen to a high of 2,300 next month," KCB Uganda said in a market report.

London-based Business Monitor Internatonal says the currency of east Africa's third-largest economy - which has gained 5.5 percent against the dollar this month - is likely to trade at an average of 2,587 in 2012, weaker than last year's average of 2,538.