At 0712 GMT, commercial banks quoted the shilling at 83.90/84.00 per dollar, barely changed from Tuesday's close of 83.85/84.05.

"The corporate (dollar demand) side has been quiet this week," said Dickson Magecha, a trader at Standard Chartered Bank.

"It's biased towards the shilling strengthening as the liquidity mop-ups continue."

The central bank stepped up its open-market operations early last month to soak up persistently high levels of shillings, adding longer-tenure repurchase agreements of up to 28-days to its range of policy options.

The bank, which has maintained an aggressive tightening stance for most of this year, was expected to keep mopping up liquidity after cutting its key lending rate by a bigger-than-expected margin last week.

Traders said they expected the local currency to trade in the 83.50-84.50 range for the rest of the week.

"Reduced dollar demand has kept the shilling well supported over the last few days and still looks well positioned to make further, albeit minimal, gains in the days ahead," said Bank of Africa in a daily report to its clients.