EM ASIA FX-Rupee set for worst month ever, Northeast Asia FX bucks trend

Reuters

* Rupee to see worst monthly fall in Aug

* Rupiah to fall 6 pct, largest fall in 5 years

* Philippine peso to see worst month since May 2012

* Won up 1.3 pct so far; Taiwan dlr rises 0.7 pct

(Adds text, updates prices)

By Jongwoo Cheon

SINGAPORE, Aug 30 (Reuters) - The Indian rupee and

Indonesian rupiah led slides among emerging Asian currencies in

August as capital flowed out of the region on expectations the

U.S. Federal Reserve will soon begin to reduce monetary

stimulus.

While most regional units scratched out gains on Friday, the

damage for the month was extensive.

The rupee has tumbled 10.4 percent against the

dollar so far this month, which would be its largest monthly

depreciation ever if it ends around current levels, according to

Thomson Reuters data.

The rupiah has lost 5.9 percent so far in August,

which would be its biggest monthly fall since November 2008.

The Philippine peso has slid 2.7 percent, which

would be the largest monthly fall since May last year. The Thai

baht has fallen 2.4 percent and the Malaysian ringgit

has weakened 1.6 percent.

The Fed is expected to start scaling back its bond-buying

programme next month. An upward revision to second-quarter U.S.

economic growth bolstered the views.

"September will be a rough month for Asian FX, with the

potential Fed taper and sustained nervousness towards emerging

markets," said Emmanuel Ng, a foreign exchange strategist for

OCBC Bank in Singapore.

When asked which Asian currencies will be most vulnerable,

Ng said: "they are going to be the usual suspects, such as the

rupee, the rupiah and the ringgit, as markets sniff out the

weakest links."

Short positions in the rupee and some Southeast Asian

currencies hit the highest levels since the global financial

crisis in 2008 during the last two weeks as sentiment on

regional currencies deteriorated, a Reuters poll showed on

Thursday.

The rupee and the rupiah are seen as especially vulnerable

to an anticipated reduction in the Fed's quantitative easing.

Both India and Indonesia are struggling with growing current

account deficits, slowing economic growth and strong resistance

to implementing much-needed reforms.

Despite spreading gloom in South and Southeast Asian

currencies, their Northeast Asian peers enjoyed monthly gains.

The South Korean won has risen 1.3 percent on

capital inflows and exporters' demand for settlements. The

Taiwan dollar has risen 0.7 percent.

Investors dedicated to emerging Asian markets are betting

that Northeast Asian currencies will fare better than their

Southeast Asian counterparts due to superior fiscal and current

account positions.

Their high-tech exports have proved more resilient to the

global slowdown, especially China's more recent slowdown, than

Southeast Asian economies which are heavily reliant on exports

of commodities and raw materials.

RINGGIT

The ringgit rose as offshore funds covered short positions,

but its upside was limited by dollar demand from custodian banks

in Malaysia.

Those custodian banks bought dollars below 3.3000 to the

ringgit, traders said.

The Malaysian currency is expected to stay weaker in

September as investors are keeping an eye on if the Fed starts

winding down quantitative easing.

"There are so many uncertainties, such as Syria, U.S.

tapering and fund exits from emerging Asia," said a senior

Malaysian bank trader in Kuala Lumpur, adding the ringgit is

likely to fall further.

The ringgit saw some support at 3.3345 per dollar, the 50

percent Fibonacci retracement of its appreciation between 2009

and 2011.

But the Malaysian unit may weaken to 3.3640, its weakest

level in May 2010, once the retracement is broken, analysts

said.

PHILIPPINE PESO

The peso gained as overall strength in regional units caused

investors to cover short positions.

The Philippine currency, however, gave up some of initial

gains on dollar demand from local companies, traders said.

Despite improvement in sentiment, onshore players including

lenders and corporates prefer dollars, they added.

"We could see a bit more upside in dollar/peso as it has

lagged the bigger rises in dollar/rupiah and dollar/rupee," said

a senior Philippine bank trader in Manila.

The peso may weaken to mid-45 per dollar in September.

Another trader said the peso may find support around 45.50,

given increasing remittance inflows in the next coming months.

RUPIAH

The rupiah edged up 0.1 percent to 10,910 per dollar in the

interbank market as the central bank was spotted providing

dollar liquidity and a day after Bank Indonesia announced

further measures to shore up the currency, including rate hikes.

Banks in the country, however, still bought dollars above

11,000 for their customers, traders said, indicating investors

did not see the new steps as sufficient to halt the rupiah's

slide.

HSBC said Thursday's actions were constructive, but they may

not be enough to support the rupiah.

"In our view restoring price discovery is still critical and

more policy support will be needed to stabilize the IDR," it

said in a note.

Forwards markets pointed further depreciation in the rupiah

with one-month non-deliverable forwards to dollar

weakening to 11,440.

BAHT

The baht advanced on exporters' demand for month-end

settlements and as some Japanese banks bought the currency.

Ten- and 5-year government bond yields

also slid.

Still, investors hesitated to push the baht stronger than

32.00 per dollar, before July current account and trade data

later in the day.

CURRENCIES VS U.S. DOLLAR

Change on the day at 0430 GMT

Currency Latest bid Previous day Pct Move

Japan yen 98.26 98.35 +0.09

Sing dlr 1.2751 1.2755 +0.03

Taiwan dlr 29.922 30.012 +0.30

Korean won 1109.10 1109.70 +0.05

Baht 32.08 32.18 +0.31

Peso 44.63 44.75 +0.28

Rupiah 10910.00 10920.00 +0.09

Rupee 67.40 66.56 -1.25

Ringgit 3.2985 3.3135 +0.45

Yuan 6.1205 6.1205 -0.00

Change so far in 2013

Currency Latest bid End prev year Pct Move

Japan yen 98.26 86.79 -11.67

Sing dlr 1.2751 1.2219 -4.17

Taiwan dlr 29.922 29.136 -2.63

Korean won 1109.10 1070.60 -3.47

Baht 32.08 30.61 -4.58

Peso 44.63 41.05 -8.01

Rupiah 10910.00 9630.00 -11.73

Rupee 67.40 54.99 -18.41

Ringgit 3.2985 3.0580 -7.29

Yuan 6.1205 6.2303 +1.79

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

Kim Coghill)

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