The shilling depreciated marginally on Wednesday for the second day in a row on increased supply and a temporary rise in orders for the dollar by corporates, traders said.
Commercial banks bought the greenback at an average of 101.13 units in early trade, slightly weaker than 100.85 close on Tuesday.
The Kenyan currency later gained slightly to trade at 101.09 units at around 2.09pm.
Increased foreign investments in government securities in recent weeks helped the shilling rally to a 20-month high last week.
A currency dealer at one of the leading investment banks said demand for dollars by companies was temporary, adding that the shilling was likely to remain steady at the current level.
“This (slight weakening) is not a trend. It was just that orders that came through on that day (Tuesday) were quite heavy and the market is very liquid in terms of shillings, and that somewhat caused the weakening,” he said.
Analysts at Genghis Capital said in a note to investors that the Central Bank of Kenya injected Sh10 billion into the market on Tuesday to counter any effect of increased liquidity demand by banks as they raced to meet the average monthly cash reserve ratio of 5.25 per cent of total deposits.
“We expect it (the shilling) to remain range-bound and we may see the regulator come in if it becomes too volatile,” Genghis analysts said.