(Recasts with Odinga comments)

By Daniel Wallis

NAIROBI, Jan 3 (Reuters) - Opposition leader Raila Odinga vowed to defy police and hold a rally on Thursday to demand Kenyan President Mwai Kibaki quit over a disputed election, which has sparked violence that has killed more than 300 people.

Both sides have traded accusations of genocide in the five days of violence that has shocked world leaders and choked off supplies of fuel and other goods to a swathe of central African nations. There have been international calls for reconciliation.

"What (Kibaki) did was nothing short of a civilian coup d'etat and he is now ruling by decree. Should we allow this kind of crime to be committed against the people of Kenya?" Odinga said in an interview with the BBC.

"This is a defining moment. The people will not take this vote-rigging by the government lying down. We also cannot have a government shooting at the people," said Odinga.

Kenya is East Africa's biggest economy and a key ally of the West in its efforts to counter al Qaeda. It is used to being a peacemaker, rather than a problem, on a volatile continent.

As young men armed with machetes manned roadblocks in rural areas for a third day running on Wednesday, the turmoil also hit financial and commodity markets.

The shilling currency dropped to a six-week low. Stocks also fell and tea and coffee auctions were postponed.

Amid a toughening of stances and rhetoric by both sides, the opposition urged its supporters to turn out in large numbers for the planned rally in the centre of the capital Nairobi.

Police said they had banned the rally because they did not have the capacity to ensure security.

"There is no such law in Kenya that anybody cannot attend a political rally," William Ruto, a senior opposition official, told reporters. "We have notified the police commissioner and he should live up to his duty of providing security."

ACCUSATIONS

A local and an international rights group said more than 300 people had been killed in the violence and both accused Kenyan security forces of having bloodily repressed protests by opposition supporters.

Kibaki's Kikuyu tribe, long dominant in Kenya's political and business life, was targeted in the initial clashes but revenge killings by Kikuyus are on the rise.

The government said it was becoming clear "well-organised acts of genocide and ethnic cleansing were well planned, financed and rehearsed" by leaders from Odinga's Orange Democratic Movement ahead of the Dec. 27 election.

The opposition accused the government of acts "bordering on genocide" by ordering police to shoot protesters enraged by Kibaki's victory at the polls. International observers said the election fell short of democratic standards.

International efforts to mediate have been stepped up.

U.S. Secretary of State Condoleezza Rice was phoning Kibaki and Odinga to urge both to "do everything they possibly can in the name of political reconciliation" to end the violence, U.S. State Department spokesman Sean McCormack said in Washington.

Nobel peace laureate Archbishop Desmond Tutu was due to meet the head of Kenya's electoral commission on Thursday. Ghanaian President John Kufuor was waiting to talk to Kibaki before deciding whether to visit Nairobi himself or send a team.

The Kenyan government and religious figures urged local leaders to preach unity to ethnically polarised communities.

Late on Wednesday, Standard & Poor's cut Kenya's long-term local currency credit rating to 'B+' from 'BB-', and said that if the violence was not stopped the foreign currency credit rating could be lowered as well. (Additional reporting by Andrew Cawthorne, Bryson Hull, Nicolo Gnecchi, Helen Nyambura-Mwaura, Katie Nguyen, George Obulutsa, Duncan Miriri and Joseph Sudah; editing by Ralph Gowling)

AlertNet news is provided by