The Kenyan shilling slipped against the dollar on Tuesday, weighed on by offshore banks closing out dollar positions after the central bank issued new trading rules, while stock rose slightly on the back of banks' nine-months earnings.

In a circular to commercial banks on October 14, Kenya's central bank unveiled new rules for local banks' dealings with their offshore counter parties, limiting the period of engagements and customers transactions disclosures.

Traders said the rules were not clear and it had taken banks long to fully grasp the impact of the rules. The central bank is scheduled to meet traders on Friday to discuss the new rules further.

At the 1300 GMT close of trade, commercial banks quoted the shilling at 100.90/101.20 against the dollar, down from Monday's close of 100.50/90.

(There is) A bit of right hand side dollar demand as offshore banks unable to utilise their shillings disposed them off, said a trader at one commercial bank.

Traders said they expected the currency to weaken if security threats persisted in Kenya's capital city after it was rocked by two grenade blasts on Monday, following its incursion into neighbouring Somalia to fight al Qaeda-linked al Shabaab militants.

If we have a continued security threat it will affect the foreign exchange market negatively, said a senior trader at another commercial bank.

Traders said investors were also watching for central bank action in the market, after it sold dollars to commercial banks and absorbed shilling liquidity through repurchase agreements last week.

The bank, which is scheduled to hold a meeting of its rate-setting committee on November 1, has been out of the market this week.

Uncertainty about the central bank's next move will continue to leave the market guessing as to what the shilling will be trading at in the days to come, said Bank of Africa in a daily market report.

In stocks, the benchmark NSE-20 Share Index inched up for a second straight day by 0.13 percent to 3,309.05 points, as banks' nine-months earnings results trickled into the market.

Virtually every investor will be watching the strength of Q3 numbers as banks embark on a busy reporting season, said George Bodo, an Analyst at Apex Africa Capital.

Kenya Commercial Bank, the biggest bank by assets, was the second of the big lenders to post a jump in pretax profit for the period.

Its shares closed 1 percent up at 14.95 shillings

Shares in Barclays Bank jumped 3.75 percent to 12.45 shillings ahead of its results for the period.

In the fixed income market, corporate and government bonds worth 2.15 billion shillings were traded, up from 1.5 billion shillings on Monday.