* Won up 0.6 pct; foreigners buy stocks for 11 days in row
* No sign of Korean authorities slowing won strength
* Indonesia expected to defend level of 8,705 rupiah vs dlr
(Updates prices, adds analysts' quotes)
By Jongwoo Cheon
SINGAPORE, March 30 (Reuters) - Hedge funds piled into the
won on Wednesday, lifting it to a seven-week high against the
dollar and suggesting the South Korean currency may lead other
Asian currencies higher in the second quarter with foreign
equity flows to the region expected to remain solid.
The won climbed to as high as 1,103.90 per dollar in local
trade as the surprising absence of intervention by Korean
authorities caused macro funds and other investors to bail out
of short won positions, accelerating the upward move.
The won's rise stood out on the day, with many other
emerging Asian currencies relatively steady. Yet with regional
equity markets reflecting strength from foreign inflows, other
currencies may follow the won higher.
"The Nikkei rebound has had a very positive effect
and enticed portfolio flows into the region given short-term
buying opportunities," said Sacha Tihanyi, a senior currency
strategist at Scotia Capital in Hong Kong, referring to a bounce
in Japanese stocks after heavy selling in the days following the
country's massive March 11 earthquake and tsunami.
"Our core view is that the Asian currency group on a whole
should be set to gain against the USD in Q2 (but not as much
against EUR), given the macro-financial fundamentals still
working against the USD... mainly related to the policy front."
Tihanyi preferred the won and the Thai baht, saying central
banks in those countries have suggested they would not hesitate
in tightening policy further to curb inflation.
Foreign investors have been net buyers of South Korean
stocks for 11 consecutive sessions -- the longest since October
2010 -- and have scooped up Indian shares for the past five
days, despite Japan's nuclear crisis and unrest in the Middle
East.
The continuous demand for South Korean shares helped the won
recover all losses since the Japan quake and even swing into
black. The currency has gained 1.8 percent against the dollar
since March 11.
Credit Agricole Coporate and Investment Bank said it expects
the won to rise further on improved risk appetite and demand for
the country's stocks.
Asian currencies weathered comments from Dallas Fed
President Richard Fisher that he would vote against any further
monetary easing by the central bank after the current program is
finished in June. [ID:nN2984973]
Possible tightening by the Fed would not drag on Asian
currencies much as the regional central banks are seen raising
rates further to fight inflation, analysts said.
"If central banks ate ahead of the curve in lifting interest
rates ahead of inflation expectations, then monetary policy will
be supportive of Asian currencies," Commerzbank said in a
research note.
WON
The won ended local trade at 1,104.2, the
strongest close since late April 2010. It is on track to be the
third-best performing emerging Asian currency in the first
quarter, up 2.8 percent.
After the local closed, it strengthened further to 1,101.6
, the firmest level in offshore trade since Feb 9.
A lack of intervention boosted views that South Korea's
foreign exchange authorities may allow more appreciation in the
won to fight inflation.
Earlier, the finance minister reaffirmed that the government
was not pursuing a policy of keeping the won undervalued to
exporters but admitted the won's rise was slower than some
investors had expected. [ID:nL3E7EU08L]
Still, some traders were wary of won-selling intervention.
Authorities were spotted buying dollars on Feb. 9, when the won
hit 1,102, the strongest since Sept. 2008.
Since then importers have been actively buying dollars for
settlements on any dips in dollar/won.
RUPIAH
Indonesia's central bank was again spotted checking the
rupiah's gains, dealers said, though upward pressure on
the rupiah from offshore players may end up dragging the pair
toward 8,705 in the medium term.
"It is stuck because the central bank keeps intervening to
support USD/IDR, so it doesn't break the 8,705 level. But flows
are coming, betting on the IDR's further strength due to inflows
from commodities exports and lower inflation figures for March,"
said a Jakarta-based dealer.
The rupiah, which had suffered from worries about inflation
earlier this year, has lately been a comeback story. It was
poised to be the best performer in the first quarter, having
risen 3.4 percent against the dollar.
Investors have chased the Indonesian currency on
expectations that the central bank will allow its appreciation
to curb rising prices.
BAHT
Standard Chartered recommended using the baht as a
funding currency to buy other emerging Asian currencies such as
the ringgit and rupiah.
Standard Chartered said the Thai currency is expected to
continue to underperform because of deteriorating external
balances and political uncertainty in coming months.
"Leveraged funds should look to use the THB as a funding
currency for long positions in other Asia ex-Japan (AXJ)
currencies, such as the Indonesian rupiah (IDR) and Malaysian
ringgit (MYR), which have a positive exposure to high commodity
prices," the bank said in a note.
The baht is particularly attractive as a funding currency
for leveraged funds as it has very low volatility, it added.
The baht has lost 0.53 percent so far this year, becoming
the worst performing currency among emerging Asian units.
CURRENCIES VS U.S. DOLLAR
Change on the day at 0705 GMT
Currency Latest bid Previous day Pct Move
Japan yen 82.99 82.48 -0.61
Sing dlr 1.2626 1.2610 -0.13
Taiwan dlr 29.465 29.477 +0.04
Korean won 1103.60 1110.20 +0.60
Baht 30.30 30.32 +0.07
Peso 43.44 43.46 +0.06
Rupiah 8712.00 8720.00 +0.09
Rupee 44.76 44.78 +0.04
Ringgit 3.0250 3.0280 +0.10
Yuan 6.5577 6.5610 +0.05
Change so far in 2011
Currency Latest bid End prev year Pct Move
Japan yen 82.99 81.15 -2.22
Sing dlr 1.2626 1.2820 +1.54
Taiwan dlr 29.465 30.368 +3.06
Korean won 1103.60 1134.80 +2.83
Baht 30.30 30.14 -0.53
Peso 43.44 43.84 +0.93
Rupiah 8712.00 9005.00 +3.36
Rupee 44.76 44.70 -0.13
Ringgit 3.0250 3.0820 +1.88
Yuan 6.5577 6.5897 +0.49
(Editing by Kevin Plumberg & Kim Coghill)
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Double click on brackets for following items:
Asian currencies Asian currencies in Asia
Malaysian ringgit Indonesian rupiah
Singapore dollar Thai baht
Taiwan dollar Hong Kong dollar
Philippine peso Korean won
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