At 0724 GMT, commercial banks quoted the shilling at 84.80/85.00 per dollar, unchanged from Friday's close.

"The move downwards (gain) was a bit drastic, so now people are trading cautiously keeping an eye both on local and international happenings," said Solomon Alubala, head of trading at Co-operative Bank of Kenya.

"Globally the major currencies have gained against the dollar and I expect the shilling to retrace these gains to about 84.50."

Traders said the local currency was unlikely to react to news that the country's internal security minister and presidential hopeful, George Saitoti, was killed in a police helicopter crash on Sunday, since there was no indication of foul play.

The shilling, which is 0.3 percent firmer the year to date, rallied more than 1 percent last week after the central bank kept a tight monetary stance for the sixth straight month and unveiled longer tenure repurchase tenders (repos).

The currency was also buoyed by investors returning to riskier assets globally after Spain received a financial boost from other euro zone member countries, relieving markets over fears of a possible banking collapse in the country.

"Reducing euro zone woes along with lack of dollar demand has seen the shilling stage a strong comeback... However the steam seems to be running out and we expect the shilling to consolidate at these levels for now," said Bank of Africa in a daily report.