The shilling touched 82.25-45 against the dollar, a level last reached on Feb 28, 2011. It was quoted at 82.40/60 at 0711 GMT, firmer than Friday's close of 82.60/80.

"Tight liquidity is supporting the shilling. Guys went heavy on government securities and that's causing the lack of shillings," said Julius Kiriinya, a trader at African Banking Corporation.

Kenya's acting finance minister has hinted at a ceiling of 82 shillings per dollar to protect exporters, and the currency's gains could be checked by energy sector importer demand for dollars and central bank buying to boost its hard currency reserves.

"Rising crude prices, a food shortage gap that needs to be funded coupled with purchases by authorities to beef up reserves could check the shilling's ascent," said Bank of Africa in a daily report.

The weighted average interbank lending rate has risen for six straight sessions, to 25.4 percent on Friday, and stands above the central bank's discount window rate of 24.0 percent.

Rising rates for bank-to-bank transactions, which offer banks high returns from lending shillings, also make them less inclined to hold dollars, thereby supporting the local currency.

A report by parliamentary committee criticised the central bank for letting the shilling plunge last year, after it kept the cost of borrowing at the discount widow below the interbank and T-bills rates, giving commercial banks an arbitrage opportunity.

Yields on government securities have soared, rising to above 20 percent in December from a low of 2 percent in January as inflation rose to 19.7 percent in November.