RAMALLAH, West Bank, Feb 14 (Reuters) - The Palestinian president suspended his chief of staff on Sunday, the official news agency said, after allegations by an ex-security officer that he tried to exploit his influence for sexual favours.

The WAFA agency said President Mahmoud Abbas had ordered an investigation into the case of Rafiq al-Husseini. The inquiry is due to report to Abbas in three weeks.

Last week, Israel's Channel 10 broadcast a report based on hidden-camera footage and interviews with a former Palestinian intelligence officer who alleged that Husseini had offered a woman employment in exchange for sex.

Fahmi Shabaneh, the former intelligence officer, told Channel 10 he had wanted to expose the case but complained nothing had been done as a result.

Husseini, reading a statement to journalists in Ramallah, said he had been ambushed by a gang that worked for Israeli intelligence. The tape was more than a year and a half old and had been dubbed, he added.

In the footage as broadcast, Husseini is asked by the woman for his opinion on Abbas. He doesn't like the people and the people don't like him, replied Husseini.

Shabaneh also said he had evidence of financial corruption by senior officials in the Palestinian Authority, which receives hundreds of millions of dollars of Western donor funding each year.

Tayyeb Abdel-Rahim, a senior Abbas aide, has described Shabaneh as a junior officer who was sacked more than two years ago for dealing with Israel and for committing a number of violations that breached integrity and honour.

The report has done nothing to help the image of Abbas and the Palestinian Authority he runs from his West Bank headquarters in Ramallah.

Perceptions of official corruption were one of the main reasons behind the defeat of Abbas's Fatah faction by the Hamas Islamist group in 2006 legislative elections. (Writing by Tom Perry)