(Updates shilling, stocks)

By Helen Nyambura-Mwaura and Katie Nguyen

NAIROBI, Jan 4 (Reuters) - Post-election turmoil caused further sharp fluctuations in the Kenyan shilling <KES=> on Friday, while the stock exchange shed 2.3 percent.

Dealers in Nairobi said the no prices had been posted in local interbank currency market since trade resumed on Wednesday amid a wave of ethnic clashes sparked by President Mwai Kibaki's disputed election win.

In offshore trade the shilling fell to 68.50 per dollar at one stage, an eight month low according to Reuters data, but prices were only occasionally being quoted on screens.

"There has been a fair amount of selling by exporters and NGOs," said Razia Khan, Africa economist at Standard Chartered in London, although she added that, "politically there are some signs that progress is being made."

"The volume was very much less than normal but at least better than the last two days," said Chris Muiga, a senior dealer at Kenya Commercial Bank.

The central bank has not posted any indicative foreign exchange rates this week. One dealer expected interbank trade to resume next week if the situation stabilised.

The Nairobi Stock Exchange's NSE-20 share index <.NSEK> extended losses to close 2.29 percent lower at 5,015.50 points on Friday.

Market capitalisation fell 2.27 percent to 785.99 billion Kenya shillings.

The currency market and stock exchange were forced to halt dealings on Thursday as police fought opposition supporters trying to stage a rally to protest at Kibaki's re-election.

But both completed a full day's trade on Friday after a second opposition rally failed to materialise, giving Kenya some respite from the turmoil that has hurt the country's tourism, tea and coffee sectors, and sparked regional fuel shortages.

"Healthy demand and supply was witnessed during the week, but the spreads between the bids and offers on some counters were as high as 6-7 percent," the bourse said in a statement.

The inhouse currency market was similar. Closing bids on Friday ranged from 65.50 to 65.80/dollar with offers at 66.00 to 66.35.

Offshore trade in the shilling <KES=> fluctuated sharply on Thursday after the Kenyan currency lost 5 percent against the dollar in the previous session.

The International Monetary Fund's (IMF) managing director Dominique Strauss-Kahn added to a chorus of concern over the political unrest in Kenya, east Africa's biggest economy.

"I very much hope that the political leaders in Kenya will quickly and peacefully resolve the current dispute over the election results," he said in a statement. "This would open the way to further progress toward economic prosperity."

On Thursday, the World Bank said Kenya's turmoil could threaten its impressive economic gains and harm regional economies that depend on it as a business hub. (Additional reporting by George Obulutsa in Nairobi and Carolyn Cohn in London)

AlertNet news is provided by