KAMPALA (Reuters) - Interbank dollar sales helped the Uganda shilling inch up against the greenback on Tuesday, a day after the central bank put the brakes on its monetary easing cycle, with an upcoming T-bill auction likely to set the tone in the days ahead. The central Bank of Uganda (BoU) on Monday left its key lending rate unchanged at 21 percent after two consecutive 100 basis point cuts in February and March, citing festering inflationary risks from a weak currency and rising food prices. Gaining for a second straight session, commercial banks quoted the shilling at 2,490/2,500 at 0952 GMT, stronger than Monday's close of 2,505/2,515. "The Bank of Uganda's move is continuing to yield confidence for the shilling in the market, which triggered some banks to offload dollars today," said Faisal Bukenya, head of market making at Barclays Bank Uganda. "We anticipate tight shilling liquidity conditions to continue. (That) makes it expensive to fund dollar positions and that should buoy the shilling in the coming days." Analysts were mixed in their reaction to the rate hold. Some had expected a further cut with inflation now down almost 10 percentage points from its October peak of more than 30 percent and fourth quarter GDP data that showed the economy contacting. Others said a hold had been likely after the shilling shed as much as 8 percent following the March cut. Market players said Wednesday's Treasury bill auction worth 120 billion shillings would help determine the shilling's direction in the short run. If yields move up for a second week on the short-term paper, offshore investor interest could be renvigorated moving forward, fixed income analysts said. A fall in yields would see foreign appetite dampened further in coming weeks, they forecast. "What happens tomorrow will give us a good signal... if yields decline we might see the shilling erase its two-day gains," said Robert Mpuuga, a trader at Housing Finance Bank.

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