NAIROBI (Reuters) - The Kenyan shilling could firm against the dollar on Friday, traders said, with the central bank expected to mop up liquidity via repurchase agreements later in the session. At 0733 GMT, commercial banks quoted the shilling at 84.15/35 per dollar, barely changed from the 84.20/40 it had closed at on Thursday. "The shilling could trade below the psychological 84.00 level if the central bank keeps mopping up liquidity," said a trader at one commercial banks. The central bank has been absorbing liquidity from the market via repurchase agreements this week as liquidity surged after the government released funds for its free primary education programme. The liquidity jump dragged the weighted average interbank interest rate down to 16.4 percent on Thursday from 16.5 percent on Wednesday. Some traders said the shilling could track the euro's gains after European leaders agreed a deal to stabilise the region's debt markets and addressed some market concerns on creditor status, easing the funding strains on Spain and Italy. Typically, when the euro gains against the dollar, investors buy into assets perceived to be risky in emerging and frontier markets. "We could see major moves on the euro over the weekend which can seep through to the shilling next week," said Dickson Magecha, a trader at Standard Chartered.

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