Traders expect the shilling to weaken, however, as players in the money market come back on line after the end of year holiday. Markets were closed on Monday.

At 0730 GMT, commercial banks posted the shilling at 85.10/30, weaker than Friday's close of 84.70/90.

"There is a bit of corporate and interbank demand but on very thin volumes," Dickson Magecha, a trader at Standard Chartered Bank said.

The central bank was in the market selling an unknown amount of dollars on Friday, the last trading day of 2011, which helped support the shilling.

Some traders said last week that the shilling would range between 84 and 87 to the dollar in January.

It looked headed for a range of 85.00-85.50 to the dollar on Tuesday, but traders also said the central bank was likely to step into the market to defend the local currency.

"We should brace for a weaker shilling as dollar demand improves in the course of the week," Solomon Alubala, head of trading at Cooperative Bank said.

Traders said the market was still tight, though the average interbank lending rate eased to 25 percent as of Friday, down from 26.8 percent the previous day.