By Kevin Mwanza

NAIROBI, Jan 2 (Reuters) - Kenya's shilling fell 0.3 percent

on Wednesday to start the new year at a seven-month low against

the dollar, under pressure from corporate client demand for

greenbacks built up over the holiday period, traders said.

On the stock exchange, benchmark shares inched up for the

second straight session.

At the 1300 GMT market close, commercial banks quoted the

shilling at 86.35/45 per dollar, a level last touched on

May 31, 2012.

'The shilling was mainly driven down by dollar orders from

the energy sector that accumulated over the holidays,' said

Robert Gatobu, a trader at Bank of Africa.

The shilling ended 2012 down 1 percent against the dollar

over the 12 months with the central bank propping it up through

regular liquidity mop-ups via the repo market.

Julius Kiriinya, a trader at African Banking Corporation,

said expectations the central bank will cut its key lending rate

on Jan. 10, after inflation fell for the 13th straight month in

December to 3.20 percent, might also tip the scales against the

shilling.

Market players said they expected the shilling to test the

86.50 support level by Friday. Breaking through that could see

it touch 87.00 before the Jan. 10 Monetary Policy Committee

meeting.

Policymakers embarked on an easing cycle in July and have

cut the central bank rate by a total of 700 basis points to 11

percent.

Typically lower interest rates make it easier for importers

to access credit and cheaper for commercial banks to hold long

dollar positions, which weighs on the shilling.

In stocks, the main NSE-20 share index added 0.2

percent to reach 4,140.43 points.

The benchmark index ended the year 29 percent up, the third-

best performer in Africa after Uganda and Nigeria, lifted by

investors returning in force after the market suffered a torrid

2011.

Analysts, however, expect subdued activity in the first

quarter of this year ahead of Kenya's first presidential

election since a disputed 2007 poll unleashed deadly ethnic

violence.

Shares in leading telecoms provider Safaricom,

gained 1 percent to 5.10 shillings. The stock accounted for half

of Wednesday's turnover.

'If we use its half-year results as the benchmark it may

perform even better in the full year,' said Virginia Wairimu, a

research analyst at Suntra Investment Bank.

Safaricom shares rose 73 percent last year, outperforming

the market average.

In the debt market, The weighted average yield on Kenya's

364-day Treasury bills fell to 11.670 percent at

auction on Wednesday, while 182-day bills were

unchanged at 8.1 percent.

...........................Shilling spot rates

.....................Shilling forward rates

.......................Cross rates

..................................Local contributors

.......................Central Bank of Kenya Index

.....................Kenyan Bonds contributor pages

...............Treasury bill yields

..................Central bank open market operations

.........................Horizontal repo transactions

,................Daily interbank lending rate

.............................Kenya Bond pricing

..................Real time Africa economic data

...........................African economic news

.................................NSE-20 Share Index

.................................NSE All Share Index

...........................FT NSE Kenya 15 Index

.......................... FT NSE Kenya 25 Index

SPEED GUIDES:

(Editing by Richard Lough)

Keywords: KENYA MARKETS/

(kevin.mwanza@thomsonreuters.com)(Tel: +254 20 2224717)(Reuters Messaging: kevin.mwanza.thomsonreuters.com@reuters.net)

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