NAIROBI (Reuters) - The Kenyan shilling weakened against the dollar on Thursday as energy sector importers took advantage of the shilling's 1.2 percent rally on Wednesday to stock up on dollars. The shilling's gains on Wednesday followed a decision by the central bank to stop injecting liquidity through reverse repurchase agreements and traders said they expected that to continue supporting the Kenyan currency as it would make it more expensive to fund long dollar positions. At 0636 GMT, commercial banks quoted the shilling at 93.80/94.00 against the dollar, weaker than Wednesday's close of 93.40/60. "There was the initial reaction to the central bank news and the effects that are going to happen. But we've also seen customers, mainly from the energy sector, coming in to purchase dollars," said Solomon Alubala, head of trading at Co-operative Bank of Kenya. Traders said they expected interest rates to rise as liquidity tightens further as tax payments are due next week. "We expect to see some tightening on the money markets that could help the shilling as the cost of holding long dollar positions becomes exorbitant," said Bank of Africa in a daily report to its clients. "We foresee a wider range of between 92.50/94.50 with volatility expected to return." The weighted average rate for overnight borrowing on the interbank market crept up to 6.7429 percent, from 6.5148 percent on Wednesday, and borrowed volumes jumped to 6.73 billion shillings from 4.36 billion shillings.

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