EM ASIA FX-Ringgit leads Asia FX higher as Fed decision looms

Reuters

* Real money funds lift ringgit

* Philippine peso at near 6-week high on stock inflows hopes

* Exporters buy Taiwan dlr on modest Fed tapering views

(Adds text, updates prices)

By Jongwoo Cheon

SINGAPORE, Sept 18 (Reuters) - The Malaysian ringgit rose to

its highest in more than five weeks on Wednesday, leading gains

among emerging Asian currencies, as investors bet the U.S.

Federal Reserve would scale back its monetary stimulus only

modestly later in the day.

The ringgit advanced on real money funds demand.

The Taiwan dollar gained on exporters' bids, while the

Philippine peso hit a near six-week high on

expectations of stock inflows.

But the Indonesian rupiah bucked the trend on

sustained dollar demand from local companies.

The Fed is set to announce the result of its two-day policy

meeting later in the day and investors expect it will trim $10

billion of its $85 billion monthly bond-buying programme.

The U.S. central bank may also seek to reassure markets that

actual policy tightening is still far away.

"If accompanied by rhetoric from Bernanke to try to keep a

lid on yields, then dollar/majors should emerge weaker," said

Jonathan Cavenagh, a senior FX strategist at Westpac in

Singapore, referring to Fed Chairman Ben Bernanke.

Emerging Asian currencies are also seen appreciating,

although they have already priced the Fed reduction in to some

degree, he added.

Recent weak U.S. economic data caused investors to expect

the Fed may dial down the quantitative easing less than

initially feared.

RINGGIT

The ringgit rose as much as 0.6 percent to 3.2300 per

dollar, its strongest since Aug. 12, on demand from real money

funds.

The Malaysian currency gave up some of initial gains as

importers bought dollars for payments on dips and on caution

before the Fed's announcement at 1800 GMT and Bernanke's news

conference soon afterwards.

But current ringgit levels already have reflected the Fed's

cut in its stimulus to some degree, traders said.

"We might see dollar/Asia lower because a $10 billion taper

is already quite priced in," said an Asian bank trader in

Singapore.

"There is a risk that Bernanke might change the 6.5 percent

unemployment target to 6 percent to warrant a rate hike because

they want to keep the long-end yields low," he added.

TAIWAN DOLLAR

The Taiwan dollar advanced as exporters bought the island's

currency for settlements before holidays.

Those companies also purchased the Taiwan dollar, with some

expectations that it may strengthen further if the Fed reduces

its stimulus by as much as expected, traders said.

But Taiwanese importers bought U.S. dollar for payments on

dips, limiting the local currency's upside.

Taiwan financial markets will be closed on Thursday and

Friday.

PHILIPPINE PESO

The peso gained 0.3 percent to 43.51 per dollar, its

strongest since Aug 12 on expectations of demand linked to

foreign investors' recent stock purchases.

Foreigners were net buyers in Manila stocks on Monday

and Tuesday.

Traders hesitated to lift the peso above the session high

ahead of the Fed's announcement, but a foreign bank trader said

the peso has priced in a $10 billion reduction in the U.S.

central bank's bond-buying programme.

The Philippine currency may strengthen more, but investors

may take profits after the decision as they already added long

positions on expectations of the modest policy shift, he added.

CURRENCIES VS U.S. DOLLAR

Change on the day at 0430 GMT

Currency Latest bid Previous day Pct Move

Japan yen 99.21 99.12 -0.09

Sing dlr 1.2601 1.2594 -0.06

Taiwan dlr 29.659 29.760 +0.34

*Korean won 1081.40 1084.10 +0.25

Baht 31.67 31.77 +0.32

Peso 43.55 43.65 +0.23

Rupiah 11511.00 11430.00 -0.70

Rupee 63.28 63.37 +0.15

Ringgit 3.2325 3.2500 +0.54

Yuan 6.1216 6.1215 -0.00

Change so far in 2013

Currency Latest bid End prev year Pct Move

Japan yen 99.21 86.79 -12.52

Sing dlr 1.2601 1.2219 -3.03

Taiwan dlr 29.659 29.136 -1.76

Korean won 1081.40 1070.60 -1.00

Baht 31.67 30.61 -3.35

Peso 43.55 41.05 -5.74

Rupiah 11511.00 9630.00 -16.34

Rupee 63.28 54.99 -13.09

Ringgit 3.2325 3.0580 -5.40

Yuan 6.1216 6.2303 +1.78

* Financial markets in South Korea are closed for holidays.

(Additional reporting by Miao-jung Lin in TAIPEI; Editing by

Kim Coghill)

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