Before you go wondering, "Is it wrong for uncle to have sex with his niece?", realize that there are two main problems with an Uncle having sex with his niece. The first problem is that the uncle is presumably older that the niece. If the Uncle is over 18 and the niece is under 18, it is not only "wrong" but it is illegal. The problem with the age difference is that a minor is not considered old enough to make a decision regarding her body and whether or not she should or wants to engage in sexual acts. If the uncle forces, tricks or manipulates his niece into engaging in sexual activities with him, this can cause emotional problems in the niece.
The fact that the uncle and niece are related is also a problem. Most states and countries have laws preventing incest. If the niece and uncle are of the same age and neither person is being manipulated into sexual behavior, it is still considered illegal. The problem with incest is that when two people have sex, the possibility of pregnancy is very real. If a child is conceived by two people who are related to one another, the chances of the child having severe mental and physical deformations are high.
If you know of someone or you yourself are in an uncomfortable sexual situation with a relative, get help. There are many resources available to those who find themselves involved with a relative against their will.