EM ASIA FX-Ringgit up on short-covering before budget; China PMI lifts Asia FX

Reuters

* Ringgit rises on hedge funds

* Rupiah hits six-week high on inflows

* Singapore dlr up, but local investors take profits

(Adds text, updates prices)

By Jongwoo Cheon

SINGAPORE, Oct 24 (Reuters) - The Malaysian ringgit rose on

Thursday as some investors hoped the government may deliver

measures to improve the fiscal deficit, while Indonesia's rupiah

led gains among emerging Asian currencies on a survey showing

solid growth in Chinese manufacturing.

The ringgit advanced as much as 0.7 percent to

3.1460 per dollar on demand from hedge funds and as other

investors reduced bearish bets on the Malaysian currency.

Prime Minister Najib Razak will trim the government's hefty

subsidy bill and likely announce a new consumption tax on Friday

as he delivers a budget seen as crucial to ward off a possible

credit downgrade and reassure investors over the Southeast Asian

country's fast-growing debt burden.

But the 2014 budget is unlikely to make drastic cuts to

subsidies that take up about a fifth of government spending, or

include deeper reforms such as reducing a bloated, but

politically influential, civil service.

The ringgit lost 0.2 percent against the dollar in the first

three days of the week, underperforming most emerging Asian

currencies, according to Thomson Reuters data.

Some analysts and traders said the Malaysian currency priced

in some hopes that the fiscal deficit issues would be addressed.

"Over the past month, politics in Malaysia and the U.S.

appeared to have switched places," said Philip Wee, a currency

strategist at DBS Bank in Singapore.

"After the UMNO elections, Malaysia appears to be getting

its act together, and is now better positioned to address the

fiscal concerns raised by Fitch," Wee said, referring to the

internal elections of the ruling United Malays National

Organisation last weekend.

The United States, on the other hand, is kicking the can

down the road on the debt ceiling deadline again because of

divisive politics on Capitol Hill, he added.

Najib aims to trim the fiscal gap from 4.5 percent of gross

domestic product in 2012 to 4 percent in 2013 and 3.5 percent in

2014 before returning to a surplus by around 2020.

Maybank said the ringgit may strengthen to 3.0770, if

Najib's announcement on Friday meets market expectations such as

the introduction of a Goods and Services Tax (GST) of 4 percent

in 2015.

If not, the Malaysian currency is seen weakening to 3.2500,

it added in a client note.

For now, the ringgit faces chart resistance at its 200-day

moving average of 3.1403.

RUPIAH

The rupiah rose as much as 0.7 percent to 11,188

per dollar, its strongest since Sept. 10, on capital inflows.

Indonesian stocks rose 0.5 percent, outperforming

most regional bourses. Most government bond yields fell with

10-year yields down at 7.151 percent, the lowest

since July 1.

Month-end dollar demand, which had put pressure on the

rupiah, eased, traders said.

"Most companies got dollars when it was above 11,300," said

a Jakarta-based trader.

The rupiah is seen heading to 11,150, he added.

SINGAPORE DOLLAR

The Singapore dollar gained on a

stronger-than-expected Chinese manufacturing performance in

October.

Strong new orders drove the fastest expansion in China's

manufacturing sector in seven months in October, a preliminary

survey showed, more evidence that the economy is stabilising

although a strong rebound remains elusive.

Some local investors took profits from the city-state's

currency, limiting its upside, amid a further spike in Chinese

money-market rates.

"It looks good to cover short U.S. dollar/Singapore dollar

positions around 1.2350," said a foreign-bank trader in

Singapore.

"Still, I don't think investors such as real money funds

would buy the pair on rallies but sell it."

CURRENCIES VS U.S. DOLLAR

Change on the day at 0430 GMT

Currency Latest bid Previous day Pct Move

Japan yen 97.32 97.39 +0.07

Sing dlr 1.2370 1.2390 +0.16

Taiwan dlr 29.386 29.425 +0.13

Korean won 1055.00 1055.80 +0.08

Baht 31.13 31.14 +0.02

Peso 43.11 43.11 +0.00

Rupiah 11180.00 11265.00 +0.76

Rupee 61.48 61.59 +0.19

Ringgit 3.1520 3.1680 +0.51

Yuan 6.0820 6.0835 +0.02

Change so far in 2013

Currency Latest bid End prev year Pct Move

Japan yen 97.32 86.79 -10.82

Sing dlr 1.2370 1.2219 -1.22

Taiwan dlr 29.386 29.136 -0.85

Korean won 1055.00 1070.60 +1.48

Baht 31.13 30.61 -1.67

Peso 43.11 41.05 -4.78

Rupiah 11180.00 9630.00 -13.86

Rupee 61.48 54.99 -10.55

Ringgit 3.1520 3.0580 -2.98

Yuan 6.0820 6.2303 +2.44

(Additional reporting by IFR Markets' Catherine Tan; Editing by

Chris Gallagher)

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