The shilling fell for the second day running, passing 87 per dollar at one point, while stocks slid by 1 percent to record their biggest loss this year after a strong start to 2013.
Banks posted the closing price of the east African country's currency at 86.80/95 per dollar, recovering from an intraday low of 87.05 to end a fraction weaker than Thursday's close of 86.85/95.
Traders sharp losses were stemmed by dollar injection to commercial banks that were running short of the greenback because of importers' demand for the U.S currency.
"There has been a bit of energy-related dollar demand that has caused the shilling to slide," said Duncan Kinuthia, head of trading at Commercial Bank of Africa.
"(The central bank) was in the market selling dollars for it (shilling) to come down," said Kinuthia, adding that the central bank was keen to contain the local currency below 87 to the dollar.
The shilling has been supported by the central bank's frequent draining of excess liquidity and selling of an undisclosed amount of dollars in three sessions this year.
On Friday the central bank received bids worth 4.65 billion shillings for the 5 billion shillings it intended to absorb, accepting all bids.
On the Nairobi Securities Exchange, the main NSE-20 share index fell to 4,500.09 points as investors booked profits on blue chips, some of which had hit new highs.
ARM Cement, ranked Kenya's No. 2 cement manufacturer, slid 4.2 percent to 57 shillings, down from the record high of 63 shillings hit on Wednesday.
East African Breweries, one of the highest-capitalised companies in the Nairobi bourse, fell 2 percent to 295 shillings.
"Most of the investors have booked decent gains with the run," said Eric Musau, a research analyst at Standard Investment Bank.
Investors were also unnerved by the political situation, Musau said, after logistical confusion during primaries held on Thursday and Friday to name candidates for parliamentary and regional polls in March.
"Investors have been looking at the political scene and have not been encouraged by the disorganisation of the nominations and sporadic chaos," he said.
Kenyans go to the polls on March 4 in the first election since 2007, when President Mwai Kibaki won a second term in office amid opposition accusations of rigging, prompting deadly nationwide violence.
A Standard Investment Bank report said the proportion of foreign investors buying shares nearly halved to 38 percent during the session, from 61 percent on Thursday.
In the debt market, bonds worth 600 million shillings were sold, nearly half Thursday's 1 billion shillings.