KAMPALA - The Ugandan shilling extended its losses on Tuesday under pressure from offshore investors seeking dollars and from the central bank buying more hard currency to build up its reserves.
Banks quoted the currency at 2,580/2,590 per dollar, weaker than Monday's close of 2,570/2,580.
"I have seen demand from some offshore investors and that pressure is being compounded by the daily purchases from the central bank," said Peter Mboowa, trader at KCB Uganda.
From Aug. 21, the Bank of Uganda raised its daily dollar purchases for its reserves to $3.1 million from $2 million.
Traders said the currency could come under further pressure in the next few weeks from an anticipated surge in appetite for dollars from importers.
Mboowa said inflation could edge up again this month, led higher by rising food prices, allowing the central bank to maintain a cautious monetary policy that has kept rates steady.
Traders have blamed that stance for putting a brake on consumer spending. The Ugandan statistics bureau is due to release August consumer price index data on Friday.
Traders also noted some continuing demand from Ugandan commercial banks to cover short dollar positions, which had helped pushed the shilling lower on Monday.
"But I see it recouping these losses in the course of the week because it's modest demand," said Thaib Lubega, trader at Stanbic Bank.