UPDATE 1-Angola's kwanza depreciates 10 percent as dollar peg ends

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JOHANNESBURG, Jan 9 (Reuters) - Angola's kwanza depreciated around 10 percent on Tuesday after the central bank abandoned its dollar peg, and traders said the currency would weaken further in coming months as it remained far from market value.

The central bank sold 83.6 million euros ($100 million) at around 221.26 per euro at its first foreign exchange auction since switching from a dollar peg to a currency trading band, it said in a notice on its website.

The kwanza was trading at 199 per euro prior to the auction, resulting in a 10 percent devaluation at the sale.

The relaxing of currency rules is the latest in a string of policy and personnel changes since President Joao Lorenco came to power in Africa's number two oil producer in September.

The central bank, which acts in lockstep with government policy, also said it had changed its benchmark exchange rate so that it is based on the kwanza/euro price, and other currency levels would be determined by where they were trading against the euro.

The kwanza was quoted at 185.5 per U.S. dollar, compared with 166/$ prior to the forex auction, central bank data showed.

This remains way above the 440/$ the kwanza trades on the streets of the capital Luanda where years of suppressed oil prices have resulted in acute foreign exchange shortages.

Two traders told Reuters they expected the kwanza to continue to weaken at future forex auctions, with one predicting the currency would fall another 20 percent in the next three months. (Reporting by Joe Brock; Editing by Alison Williams)