NAIROBI (Reuters) - The Kenyan shilling was stable against the dollar on Friday, but traders said the local currency was on a weakening bias as falling interest rates made it cheaper for commercial banks to hold long dollar positions. The shilling was posted at 84.30/50 per dollar at 0715 GMT, unchanged from Thursday's close. "There is a negative cloud on the shilling on account of the falling yields," said Raphael Owino a senior trader at Commercial Bank of Africa. "There is a bearish tone on the shilling. ... as yields fall it's less attractive to hold the currency." Yields on the benchmark 91-day Treasury bill fell to 7.515 percent on Thursday amid low demand, from a high of close of 21 percent at the beginning of the year. Market players said technical analysis of the shilling's 14-day and 50-day weighted moving average showed the shilling was likely to keep weakening in the short term. Kenya's central bank slashed its key lending rate by 350 basis points to 13 percent this month and economic analysts expect further loosening. Chris Muiga, a trader at Kenya Commercial Bank, said it would likely be four to six months before growth in imports as a result of cheaper credit translated into an uptick in inflationary pressure. Traders said they expected the central bank to continue mopping up liquidity through repurchase agreements and were looking to the central bank to mop up excess during the session. On Thursday, the central bank which sought to mop up 3.5 billion shillings, received bids worth 10.65 billion shillings. It accepted 3.5 billion shillings at 8.13 percent, offering a more favourable return than government paper.

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