NAIROBI (Reuters) - The Kenyan shilling was steady on Monday and traders said they expected it to firm during the week on reduced dollar demand and central bank moves to reduce local currency liquidity. The shilling gained some 7 percent last week after the central bank mopped up 6.25 billion shillings in three consecutive sessions through repurchase agreements. At 0641 GMT, commercial banks quoted the shilling at 83.65/85 against the dollar, barely changed from Friday's close of 83.70/90. "There is not much activity at the moment ahead of the Christmas break. If central bank will be in it will strengthen the shilling further," said Pally Muchiri, a trader at Co-operative Bank. The shilling's next resistance level would be 83.00 to the dollar, traders said. The shilling is 21.8 percent off a record low of 107 hit in October after the central bank adopted a monetary tightening stance that has seen the benchmarket central bank rate raised by 11 percentage points since October 5 to 18 percent. The local currency is still down 3.8 percent this year. Tight shilling liquidity pushed the weighted average interbank rate up to 16.6 percent on Friday from 13.6 percent on Thursday. "With authorities continuing to tighten liquidity, we expect the local unit to continue firming as access to shilling credit (is) restricted," said Bank of Africa in a daily report. "The shilling has been breaking all the resistance levels with ease and the next target is 83.00."

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