NAIROBI (Reuters) - The Kenyan shilling weakened slightly against a globally stronger dollar on Monday and traders said they expected it to weaken further, pulled down by increased liquidity in the market. At 0739 GMT, commercial banks quoted the shilling at 83.65/85 per dollar, slightly weaker than Friday's close of 83.60/80 and close to a three-month low of 83.70/90 hit on Thursday. "It looks like the shilling could head to 84 by the end of the week due to the increased liquidity and a stronger dollar due to the euro woes," said a trader at one commercial bank. A political deadlock in Greece saw talks to form a government fail, spurring global risk aversion, which could see emerging currencies, including the shilling, cede ground to the dollar. A surge in shilling liquidity in recent weeks, which makes it easier for importers to take long dollar positions, has seen the central bank mop up 34.3 billion shillings via repurchase tenders since April 27. Traders said liquidity had increased in the market due to debt redemptions and the central bank rejected most bids at the Treasury bills auctions, in a bid to keep reducing the government's cost of borrowing. They said the central bank was likely to soak up more liquidity in the coming days to try and support the shilling. "Liquidity will also weigh on the shilling this week, but the central bank could continue mopping up," said John Muli, a trader at Africa Banking Corporation.

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