Traders said the local currency might breach its resistance level of 90 -- last seen on July 26 -- later in Monday's session or in the days ahead, with little on the radar seen undermining sentiment favouring a stronger shilling.

"Market sentiment is for the shilling to keep firming," said Kennedy Butiko, deputy head of trading at Bank of Africa Kenya.

"(Dollar) demand has dwindled on the cost of borrowing."

Commercial banks quoted the shilling at 90.65/85 to the dollar at 0833 GMT, up from Friday's close of 91.20/40 and after touching 90.50/70 earlier.

Competition for shillings on the money market during an acute liquidity crunch pushed the average interbank rate to 29.7 percent on Thursday, making it costly for banks to hold foreign exchange and prompting them to convert dollars. Interbank figures for Friday were not available at 0805 GMT.

The shilling collapsed through a string of record lows during the first nine months of the year as policymakers anxious not to hurt economic growth failed to take decisive action to support the currency and combat inflation.

An aggressive tightening of monetary policy in October stopped the currency rot and largely restored confidence in Kenyan markets. The shilling has climbed 15 percent off its Oct. 11 low of 107, helped by the liquidity crunch.

The central Bank of Kenya is set to hold its next Monetary Policy Committee on Dec. 1.

"If the shilling breaks 90 comprehensively, then the next level is 88," said Solomon Alubala, head of trading at Co-operative Bank.

"The only real risk to the shilling lies with monetary policy, if they surprise us with a rate cut. But the focus is still on inflation," he said.

An acceleration in the month-on-month change in Kenyan consumer prices in October pushed the year-on-year rate of inflation to 18.91 percent.