Ugandan shilling extends gains as banks cut dollar positions

By Elias Biryabarema KAMPALA (Reuters) - Uganda's shilling added to its gains on Friday as commercial banks trimmed their dollar positions more in the wake of the U.S. Federal Reserve's surprise decision not to reduce its stimulus programme. "A good number of players are cutting back their dollar holdings," said Ahmed Kalule, a trader at Bank of Africa in the capital, Kampala. "And of course weak local (dollar) demand is also helping strengthen the rally." The shilling has gained 1 percent against the U.S. currency since the Fed's announcement. At 1000 GMT, commercial banks quoted the shilling at 2,445/2,555, from Thursday's close of 2,557/2,562. Further support for the shilling in coming sessions is seen from foreign aid agencies and companies converting hard currency into shillings to pay salaries and operating expenses at the end of the month. One market player said the central bank might intervene to slow the shilling's gains if it strengthened much beyond 2,550. "I don't think the Bank of Uganda is very comfortable with such a steep climb in just two days," said Nicholas Mutatira, a trader at Centenary Bank. "Below 2,550 the shilling is likely to provoke concern about the impact on exporters and it's possible they might come in to push it up (weaken) a little."