KAMPALA (Reuters) - The Uganda shilling firmed 0.2 percent against the dollar on Wednesday, helped by a liquidity squeeze on the local currency and strong dollar inflows into the export sector, traders said. At 0950 GMT commercial banks in Kampala quoted the local currency at 2,400/2,410, a touch firmer than Tuesday's close of 2,405/2,415. "There are (dollar) inflows from commodity exporters which have buoyed the shilling," said Peter Mboowa, a Treasury dealer at KCB Uganda. "The shilling liquidity, however, is also very tight. Players can't afford to take long dollar positions and that's tilting the market in favour of the shilling." The local currency is up 3.1 percent against the U.S. currency this year and is way off its 2,901 all-time record low hit in September, which was attributed by the central bank to tight greenback supplies, speculative trading and a slump in the Kenyan currency. Kenya, east Africa's largest economy, is Uganda's biggest regional trading partner. Stanbic Bank Uganda said corporate dollar demand was also subsiding, offering support to the shilling. "Market sentiment points towards further gains of the local currency if lack of significant demand persists," Stanbic bank said in a market briefing.

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