KAMPALA (Reuters) - The Uganda shilling lost ground on Wednesday on demand for dollars from commercial banks but should hold its own in coming days as domestic tax payments fall due, traders said.
At 1055 GMT, commercial banks quoted the shilling at 2,505/2,515, weaker than Tuesday's close of 2,488/2,498.
"Demand (for dollars) in the interbank market has put the shilling under some pressure but overall we expect the local unit to remain stable in the days ahead," said Brenda Akumu, a trader at KCB Uganda.
She said technical analysis showed the shilling was finding resistance at 2,480 and support at 2,510.
The local currency has been on a shallow upward trajectory since the Bank of Uganda (BoU) ended a two-month policy easing cycle, leaving its key Central Bank Rate (CBR) unchanged this month at 21 percent compared with March.
Although year-on-year inflation dropped sharply in March, the central bank said it paused a series of rate cuts because price pressures remained high, driven by a weak local currency and high food costs.
"We might see the unit (shilling) continue to trade rangebound... on the back of low customer demand as they settle their tax obligations this week," said Stanbic Bank in a market brief.
Analysts say the central bank's policy shift is likely to maintain yields on Ugandan debt at attractive levels for offshore investors, keep dollar supplies healthy and the shilling supported.
A slump in yields and an unexpected rate cut last month triggered a sharp plunge of the shilling to a 2012 low of 2,620 on March 6.
