EM ASIA FX-U.S. budget, Fed uncertainties hurt Asia FX for week; ringgit, rupiah down

Reuters

* S.Korea says has not discussed FX swap with Indonesia

* Rupiah falls on foreign banks, local corp dlr demand

* Ringgit lower on dlr short-covering

(Adds text, updates prices)

By Jongwoo Cheon

SINGAPORE, Sept 27 (Reuters) - The Indonesian rupiah and the

Malaysian ringgit led weakness among emerging Asian currencies

on Friday as worries about fiscal and monetary policy in the

United States kept investors away from riskier assets.

Most regional units posted losses on the week.

The rupiah slid after South Korea on Thursday

denied it was in talks with Indonesia on a bilateral currency

swap deal, in response to repeated remarks by Jakarta officials

that an agreement would be signed soon.

The ringgit eased on dollar-short covering in thin

trading after a report showing U.S. jobless claims fell last

week, renewing some expectations that the Federal Reserve may

scale back its stimulus soon.

Still, some analysts said a tapering move by the Fed may not

be imminent, given political uncertainty over U.S. budget

wrangling.

"It is unlikely to see October tapering due to conflicts

among U.S. lawmakers over the budget," said Jeong My-young,

Samsung Futures research head in Seoul.

"A potential government shutdown may be negative to risky

assets including Asian currencies. But we have experienced it

before, so the impact would be limited," Jeong added.

Most emerging Asian currencies were set to see weekly losses

as U.S. House of Representatives Republicans on Thursday refused

to give in to President Barack Obama's demand for

straightforward bills to run the government beyond Sept. 30 and

to increase borrowing authority to avoid a default.

For the week, the ringgit was the worst performing emerging

Asian currency with a 1.7 percent slide against the dollar,

according to Thomson Reuters data.

The Malaysian currency was the top gainer in the previous

week when regional units rallied as the Fed unexpectedly

maintained its monetary stimulus.

The rupiah has fallen 1.4 percent, while the Thai baht

has lost 0.8 percent.

The Philippine peso has slid 0.6 percent and the

Singapore dollar has eased 0.3 percent.

RUPIAH

The rupiah fell as foreign banks cut long positions after

South Korea said it is not in discussions on a currency swap

arrangement with Indonesia.

Local banks also bought dollars on behalf of local

companies, traders said.

The Indonesian currency may stay under pressure, but it is

likely to find support at 11,600 per dollar on possible

intervention by the central bank, traders added.

Investors are keeping an eye on economic data next week,

especially August trade figures due on Tuesday for any signs

that the country's trade deficit may be easing.

A Jakarta-based trader said trade deficit would be smaller

than July's record shortfall of $2.31 billion.

The rupiah is expected to trade in a range between 11,600

and 11,400, the trader added.

RINGGIT

The ringgit slid in thin trading with higher 3-year

government bond yield.

Malaysia will sell 2.5 billion ringgit ($777.7 million)

government bonds maturing on Sept. 30, 2043.

Foreign investors may not show strong interest in the bonds,

an Asian bank trader in Singapore.

"Offshore investors are unlikely to have any interest since

it's the first time and liquidity will be bad in the secondary

market," he said.

In addition to such an expectation, U.S. uncertainties are

likely to put pressure on the ringgit next week, a senior

Malaysian bank trader in Kuala Lumpur.

The trader was looking to sell the ringgit on rallies for a

target of 3.3000 per dollar.

CURRENCIES VS U.S. DOLLAR

Change on the day at 0440 GMT

Currency Latest bid Previous day Pct Move

Japan yen 98.72 99.02 +0.30

Sing dlr 1.2556 1.2549 -0.06

Taiwan dlr 29.572 29.673 +0.34

Korean won 1074.40 1075.10 +0.07

Baht 31.20 31.18 -0.06

Peso 43.33 43.25 -0.17

Rupiah 11522.00 11450.00 -0.62

Rupee 61.92 62.07 +0.24

Ringgit 3.2200 3.2145 -0.17

Yuan 6.1208 6.1214 +0.01

Change so far in 2013

Currency Latest bid End prev year Pct Move

Japan yen 98.72 86.79 -12.08

Sing dlr 1.2556 1.2219 -2.68

Taiwan dlr 29.572 29.136 -1.47

Korean won 1074.40 1070.60 -0.35

Baht 31.20 30.61 -1.89

Peso 43.33 41.05 -5.25

Rupiah 11522.00 9630.00 -16.42

Rupee 61.92 54.99 -11.19

Ringgit 3.2200 3.0580 -5.03

Yuan 6.1208 6.2303 +1.79

($1 = 3.2145 ringgit)

(Editing by Kim Coghill)

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