They attributed the drop to uncertainty caused by Monday's announcement that the finance minister would be charged with financial misconduct. The shilling has lost 0.8 percent since the charges were announced.

President Uhuru Kenyatta appointed Labour Minister Ukur Yatani as acting finance minister on Wednesday, a day after incumbent Henry Rotich was charged with corruption.

Traders said banks had built up their dollar positions due to worries that the vacuum at the finance ministry could lead to further weakening of the currency.

"This has been driven by forwards, banks and clients are holding long dollar positions seeing the shilling could weaken further, so they are covering for their future demands," said a senior currency trader at a commercial bank.

The charges against the Rotich had also fuelled concerns that foreign investors could shun Kenyan assets, said a second trader.

"It has affected the Eurobond yields and the whole perception, image of the country in the international arena ...some investments must have been held back," said the second trader.