KAMPALA (Reuters) - The Ugandan shilling weakened a touch on thin volumes on Friday and looked primed for further losses on expected start-of-month demand for dollars from the energy and manufacturing sectors. "We expect a surge in demand for dollars from big firms in sectors like manufacturing and energy," said Robert Mpuuga, a dealer at Housing Finance Bank. "So we anticipate a risk of a weaker shilling." At 0935 GMT commercial banks in Kampala quoted the local currency at 2,335/2,345, 0.2 percent lower than Thursday's close of 2,330/2,340. Falling yields on government paper could also weigh on the shilling if foreign investors lose their appetite for Ugandan debt. "Rates are easing and we expect some offshore investors to start exiting the market and take their profits," said David Bagambe, a dealer at Diamond Trust Bank. "We also expect some multinationals to start paying 2011 dividends ... all this could push the shilling (weaker)." Heavy demand for Uganda's 364-day paper on Wednesday helped drive yields down to 18.808 percent from 19.152 percent previously, reducing the take-up by offshore investors. Typical end-month dollar inflows to the aid sector may offer some support to the Ugandan currency. Technical analysis showed the shilling, which has climbed 6 percent against the dollar so far this year, was overbought versus the dollar, signalling scope for a correction, Bagambe said.

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