The shilling weakened against the dollar on Wednesday, exchanging at an average of 103.15 in commercial banks compared to 102.90 on Tuesday.
Dealers said that there is heavy demand for dollars from importers as they resume business activities following the Christmas holiday break.
The shilling last traded at its present levels in mid-October 2015, when it hit a low of 103.50/60 on Oct. 13.
A dealer told Reuters that the sharp depreciation seen Wednesday had forced the Central Bank of Kenya to intervene and sell dollars to stem market volatility.
Lots of demand
"Markets weakened and then we have seen central bank in the market. It has reduced the pace of the shilling's depreciation. There is lots of demand," said Reuters, quoting a senior trader at one commercial bank.
The Central Bank rarely comments on dollar sales.
It has, however, gone on record in the past saying that it does not seek to determine the direction or level of the exchange rate, but rather intervenes to prevent volatility.
The demand for dollars is expected to persist in coming days, especially from the energy sector which is also contending with higher petroleum prices in the international market.