NAIROBI: The Kenyan shilling inched up against the dollar on Wednesday and traders said they were focusing on the central bank's decision on interest rates later in the day.

At 0740 GMT, commercial banks posted the shilling at 107.55/75 per dollar, slightly up from 107.60/80 at Tuesday's close.

The shilling has gained 50 cents this week.

Traders attributed the gains to reduced demand for dollars, amid an increase in supply from farm exporters. The market was keenly watching the outcome of the policy meeting.

"We are looking at inflation threatening to go up. There has been talk of them returning rates where they were (raising) which would be good for the shilling," said a currency trader at a commercial bank.

A Reuters poll of economists and market participants showed that the market expects the central bank to hold rates.