The central Bank of Uganda (BoU) is due to sell a total of 120 billion shillings ($48.29 million) worth of Treasury bills of all maturities on Wednesday.

Although a cut to the central bank's key lending rate earlier this month is seen driving rates on government debt down further, yields are still seen as attractive.

"Our yields are still good for offshore people...about 20 percent for the one year paper with about 200 basis points above inflation is an absolutely good rate of return," said Ahmed Kalule, a trader at Bank of Africa.

At the last auction on May 30 the benchmark 91-day paper returned a weighted average yield of 17.9 percent from 18.7 percent at the previous sale.

At 1127 GMT commercial banks in Kampala quoted the currency of Africa's largest coffee exporter at 2,480/2,490, unchanged from Friday's close.

"We might see the unit gain... this week on the back of expected dollar inflows for the Treasury bill auction," Stanbic Bank Uganda said in a daily market briefing.

Stanbic also forecast corporate dollar demand would be subdued this week as companies pay their mid-month tax payments in shillings, helping the shilling to react to any support.

Stanbic, Uganda's largest commercial bank by assets, announced on Monday it would cut its prime lending rate to 27 percent from 28.5 percent on June 29, in the wake of the June 1 central bank rate cut of 100 basis points to 20 percent.

Stanbic is among the first of the major lender to react to the rate cut and other banks are expected to follow suit, traders said.

Denis Mashanyu at Standard Chartered in Nairobi said the market was now looking to Thursday's budget reading to give the shilling firmer direction.

Analysts say the 2012/13 budget is likely to focus on infrastructure in energy and transport as key areas to return the economy to a strong growth footing.