Uganda Shilling Weakens Against US Dollar -08 - May-2012

The Ugandan shilling weakened against the dollar on Tuesday, weighed down by demand for the U.S. currency from importers and concerns over mounting instability in Uganda's neighbour and trading partner South Sudan.

At 0953 GMT, commercial banks quoted the currency at 2,480/2,490 against the dollar, weaker than Monday's close of 2,470/2,480.

"We have demand (for dollars) from the energy sector and that's undermining the shilling a bit," said Ahmed Kalule, a trader at Bank of Africa.

He said markets were also nervous about the implications of the recent flare up of the long-running conflict between South Sudan and Sudan.

Dollar inflows were also expected to be limited by a lack of government debt auctions scheduled for this week.

Bank of Uganda held its key lending rate at 21 percent for a second straight month last week, keeping yields relatively attractive to offshore investors.

Robert Aloo, head of Treasury at KCB Uganda, said the shilling would find its support and resistance levels at 2,500 and 2,460 respectively over the next few days.

Reuters