Citibank has "categorically denied" charges by a former foreign exchange employe that the bank had been involved in fraudulant currency trading operations.

David Edwards, who sued the bank for $14 million after he was fired, has charged the bank with violating currency and tax laws in several countries. Edwards contends he was improperly fired on Feb. 9 by Citibank because he continually questioned bank operations to his superiors.

Yesterday, Citibank said Edwards was fired "not because he raised questions about bank practices, but because of circumstances surrounding his refusal to accept reassignment."

That statement, however, is contradicted somewhat by a letter written to Edwards on Dec. 14, 1977, by Citibank Executive Vice President Thomas Theobald, and obtained by the Washington Post. "We had." Theobald wrote Edwards, "after careful review and consideration, and prior to the receipt of your counsel's letter, concluded that your continued allegations were detrimental to the best interests of Citibank. Therefore, we request your immediate resignation."

The bank has indicated in court papers that it will seek to determine if Edwards illegally removed internal documents from bank files. If so, the bank said, it will take legal action against him in the form of counter-suits.

Edwards has alleged that the bank shifted profits from its European branches to its Nassau branch merely to avoid paying taxes in Europe.

The bank denies this, contending that it is obeying the laws for each country in question. "The tax effect on Citicorp [of the actions alleged by Edwards] would eb approximately the same no matter how a transaction were handled."