"They have sold (dollars) to mid-sized banks," said one trader, who asked not to be named because of sensitivities about publicly discussing central bank intervention and policies.    By 0836 GMT, the shilling was quoted at 89.90/90.10,compared with 90.10/30 earlier in the session.   

The currency initially strengthened to 89.75/95 on Friday but gave up some of those gains.     The central bank intervened on Thursday and last week as well, on both occasions selling dollars when the shilling was around the 90.30-level.  

For now, traders said the shilling was likely to be capped at about 90.50. They said the central bank's aim might be to deter speculation rather than spend its reserves supporting the currency when there was real corporate demand.  

"The supply side continues to be constrained," said another trader at a leading commercial bank. The shilling has been under pressure this year mainly due to a slump in revenues from tourism, a major hard currency earner that has been hit by a spate of militant attacks. Tea export earnings have fallen because of lower global tea prices, and the dollar has also strengthened against several major currencies. 

 The central bank has not set any exchange rate level and does not usually comment on any intervention, but it has said it has enough reserves to cushion the market against shocks.  

--reuters--