At 0723 GMT, commercial banks quoted the shilling at 84.00/20 per dollar, slightly down from the 83.85/84.05 at which it closed on Friday.

"The shilling has weakened on short covering by some banks and profit taking," said John Muli, a trader at African Banking Corporation.

"Globally the euro and pound are also weakening ahead of the EU summit and the shilling is tracking that too."

On the international front, investors were sceptical that a June 28-29 European Union summit would make any substantial progress towards tackling the euro debt crisis.

 Typically, when the euro falls against the dollar, it moves the shilling as investors rush out of assets perceived to be risky in emerging and frontier markets.

Technical charts showed the shilling's resistance at 84.50 to the dollar, traders said.

Tight liquidity that had pushed the weighted average interbank interest rate up to 19.8 percent on Friday from 19.4 percent a day earlier could support the shilling, dealers added.

The central bank has persistently mopped up excess liquidity in the market via repurchase agreements, which has helped the local currency gain 1.4 percent in the year to date, but the bank has stayed out of the repo market since June 19.

"End-month (dollar) demand this week could weigh on the shilling, but tight liquidity on the money market side could support it," said a trader at one commercial bank.