The shilling had been rangebound roughly between 102.00 to 102.50 to the dollar since early November, but this week strengthened to below the 102 level.
Kenya's shilling was steady in early trade on Thursday with corporate demand for dollars subdued, as companies held off from purchases to see if the shilling would strengthen further.
The shilling had been rangebound roughly between 102.00 to 102.50 to the dollar since early November, but this week strengthened to below the 102 level. By 0639 GMT, it was quoted at 101.82/92, compared with Wednesday's close of 101.80/101.90.
"Most people are waiting to see how far it can go down," said one dealer at a commercial bank. "They are holding their shillings and postponing their demand (for dollars)."
One trader said some pressure on the shilling could emerge after an auction of a nine-year government infrastructure attracted fewer offshore bids than expected, meaning lower dollar inflows than forecast.
"The anticipated flows didn't materialise," the trader said, after the central bank offered a bond worth 30 billion shillings ($294.93 million) but bids covered just 55 percent of that.
The average yield was 14.753 percent.