* Officials say Tuareg fighters opened fire on army, MNLA denies this
* Intelligence official says army reinforcements arrive in Kidal
* Latest sign of escalating tensions after Tuaregs end ceasefire
Tuareg separatists and Malian soldiers exchanged fire in the northern town of Kidal on Sunday, residents said, in a sign of escalating tensions three days after MNLA rebels ended a ceasefire with the newly elected government.
Local officials said Tuareg separatists attacked an army unit stationed outside a bank in the centre of the desert town. However, a spokesman for the rebel group said it was the soldiers who opened fire on an MNLA vehicle, injuring three men inside.
The incident in Kidal - the birthplace of a Tuareg uprising last year that sent Mali into chaos - came two days after a grenade attack outside the same bank in which two Malian soldiers were wounded.
"Our fighters are now on high alert," said Moussa Ag Acharatoumane, a Paris-based spokesman for the MNLA.
Residents said that calm returned to the town as night fell.
A Malian intelligence official, who asked not to be identified, said the clashes coincided with the arrival of more army troops from the nearby town of Anefis. The military is trying to reimpose its control over northern Mali.
"Now the town is surrounded by Malian forces, which are taking advantage of the situation to take back some positions occupied by the rebels," the official said.
MNLA fighters had agreed to remain in barracks in Kidal under a June ceasefire deal to allow presidential elections to go ahead in the remote region.
The group broke off the deal on Thursday. It accused President Ibrahim Boubacar Keita, who won August's presidential runoff, of not honouring the terms of the agreement, which called for peace talks within two months of him taking office.
Recent days have seen an escalation in violence in northern Mali, where French troops are still stationed after a military operation to destroy an Islamist enclave in northern Mali earlier this year. A 12,600-strong U.N. peacekeeping force is also being deployed to the West African country.
On Saturday, at least four people were killed and several wounded in a suicide car bombing in the northern town of Timbuktu by suspected Islamist rebels.
That was the first suicide attack since President Keita was sworn into office this month.
Keita won the Aug. 11 runoff by a landslide with a pledge to reunite Mali after a March 2012 military coup, triggered by the Tuareg uprising, plunged the country into chaos and allowed Islamists to seize its northern two-thirds of the nation.
The shooting in Kidal came hours after a large explosion rocked the centre of the town. It did not cause any injuries. Local officials said the cause appeared to be the overheating of old munitions being stored in a former World Food Programme warehouse.