The Kenyan shilling firmed on Tuesday, lifted by inflows from tea exporters selling dollars after the auction, while shares fell for the eighth straight session. At the 1300 GMT market close, commercial banks quoted the shilling at 83.70/90 per dollar, stronger than the 83.80/84.00 it closed at on Monday. The local currency has firmed 2.7 percent so far this year, mainly on a relief rally that followed a peaceful presidential election in March. "We've seen a substantive dollar sale from the tea sector in a market with very little demand," said Peter Njuguna, a senior trader at Kenya Commercial Bank

Tea is Kenya's leading foreign currency earner and is sold in the port city of Mombasa every Tuesday. Exporters typically then convert their earnings into shillings to pay farmers and cover operational expenses. Traders said the shilling could further strengthen when investors start paying for five and fifteen year Treasury bonds, worth a total 25 billion shillings ($300 million), after the auction on Wednesday. Investors have piled into Kenyan assets in recent weeks since the March 4 presidential election, which went off peacefully, in contrast to the disputed vote five years ago that was followed by deadly violence in which 1,200 people died. "We may get more (dollar) inflows from the bond later in the week," said John Muli, a trader at African Banking Corporation, who expects the shilling to strengthen.

In stocks, the benchmark NSE-20 share index eased 0.3 percent to 4,824.40 points, while the Nairobi All Share Index dipped 0.2 percent to 117.98 points. The NSE-20 index has declined over 4 percent since April 11, mainly due to investors taking profits after a 12 percent rally that followed a largely peaceful election. The index is still up 18 percent so far this year. "A fall in demand from medium to long term investors is a sign that investors hold that most counters are too expensive and have been overbought after the vote," said Ronald Lugalia, an analyst at Afrika Investment Bank.

Media firm Standard Group eased 7.3 percent to 31.75 shillings per share after posting a 4.8 percent dip in its full-year 2012 earnings per share. In the debt market, bonds worth 1.3 billion shillings were traded, down from 1.8 billion shillings on Monday.