At 0716 GMT, commercial banks quoted the shilling at 83.45/65 against the dollar, barely change from Wednesday's close of 83.50/70.

"The shilling is holding on support from little activity on the (dollar) demand side as companies close for Christmas," said Robert Gatobu, a trader at Bank of Africa.

Charts showed the shilling's next resistance level would be 83.00 to the dollar, traders said.

The shilling is now 22 percent off a record low of 107 hit on Oct. 11, thanks to a tight monetary stance that has seen the central bank rate raised by 11 points since Oct. 5.

The shilling is still 3.7 percent weaker against the dollar in the year to date.

"We expect the local unit to continue firming aided by the tightening in shilling liquidity," said a trader at another commercial bank.

The average daily interbank lending rate rose to 25.6 percent on Wednesday from 22.7 percent in the previous session, as banks' competed for scarce shillings, increasing the cost of holding dollars.