At 0755 GMT, commercial banks quoted the shilling at 85.45/65 per dollar, weaker than Monday's close of 85.10/30.

"Yesterday's dollar orders by the oil sector guys are still in the market," said a trader at one commercial bank.

"We're watching the global markets to see if the euro will hold onto its gains. That could also impact on the shilling."

The shilling tumbled to a five-month low of 87.80 per dollar on May 31, largely on panic-buying of the US currency by local importers after the greenback gained significantly on the back of fears over a possible Greek exit from the euro.

Typically, when the euro weakens against the dollar, it affects the shilling as investors flee from assets perceived to be risky in emerging and frontier markets.

The shilling, however, recovered last week after the central bank held its key lending rate at 18 percent for the sixth straight month and unveiled longer tenure repurchase tenders (repos), while global risk aversion over the euro zone crisis subsided.

Traders said the shilling could get support from the Central Bank of Kenya (CBK) mopping up liquidity using the longer tenure repos, which were very attractive to commercial banks.

The bank has been soaking up shillings at every session since April 5 after liquidity surged due to debt redemptions, making it easy for commercial banks to hold long dollar positions.