The shilling has been fairly stable this year - down 0.3 percent to date - stabilising after a dramatic slide in the middle of last year which drove the central bank to adopt a tight stance on monetary policy.

An easing cycle adopted by policy makers since July is seen weighing on the local currency, however, as it makes it cheaper for commercial banks to hold long dollar positions, which weigh on the shilling.

Traders said a lower inflation reading expected in September could give the central bank further room to cut its key interest rate.

"Dollar demand for end-month obligations has been very dominant with the energy sector driving most of it," Bank of Africa said in a daily report.

The shilling was trading at 85.20/40 versus the greenback at 0658 GMT, 0.2 percent weaker than Wednesday's close of 85.10/30.

Bank of Africa said offshore investors exiting maturing government papers were also adding further pressure to the shilling.