September 22, 2017 / 6:04 AM / in 9 months

EM ASIA FX-Won slips as N.Korea hints at Pacific nuke test; rupee breaches 65 to 5-month low

 (Adds text, updates prices)
    By Anusha Ravindranath
    Sept 22 (Reuters) - The South Korean won
staggered on Friday and headed for its third week of lossses on
renewed North Korean fears, while the Indian rupee fell
to a 5-month low on concerns the government may need to borrow
more to boost growth.
    North Korea said on Friday it might test a hydrogen bomb in
the Pacific Ocean after U.S. President Donald Trump vowed to
destroy the country, with leader Kim Jong Un promising to make a
"mentally deranged" Trump pay dearly for his threats.

    The won slipped for a second straight session to its lowest
in a month, while most other emerging Asian currencies were
    "We're too used to the North bluffing." said Jonghyun Kim,
an FX trader at Kookmin Bank.
    "Nuclear weapon is NK's only bargaining chip right now. They
want the image that they are at par with the U.S.,
military-wise. The won will be affected by the headline yes, but
we need more than that." he added.
    Among other Asian currencies, the Indonesian rupiah
hit over two-week low, while the peso appreciated as
much as 0.4 percent and was on track to post gains on the week. 
    As expected, the Philippine central bank held its key
interest rate steady on Thursday, predicting inflation will
remain within its comfort range this year and next.
    On the same day, Taiwan's central bank left its policy rate
unchanged, saying inflation was expected to be mild against a
backdrop of rising pressure on the trade and economic fronts.

    The Taiwan dollar rose to its highest in over two
weeks on Friday before turning flat, and was on course for
second week of lossses.
    The yuan firmed as much as 0.3 percent but pared
gains and was flat as of 0330 GMT.  
    S&P Global Ratings said China's deleveraging process will be
much more gradual than expected in the next few years, a day
after it downgraded the country's sovereign credit rating.
    Rupee hurdled above the 65 level and was on track
for its biggest weekly fall since August 2015.
    "The reaction is more to do with the Indian side of the
news. The government is now in a situation where it might be
borrowing more or spending to spur growth," said Hiren Sharma,
Founder And Managing Partner of Mumbai-based Portia Advisory
    "However, I think this is decent, post the comeback from the
levels last seen in February." he added. 
    Finance Minister Arun Jaitley had said on Wednesday that
India was considering ways to revive its slowing economy and
will unveil the "necessary" steps once Prime Minister Narendra
Modi approved them.
    The currency hit its lowest level in more than two months in
the previous session. 

    Rupiah traded soft ahead of a central bank meeting,
where policymakers are widely expected to keep the benchmark
interest rate unchanged, following a surprise cut last month.
    "We are expecting them to leave the policy rate unchanged.
Meanwhile, they may signal room for further rate cuts with a
dovish stance" said Qi Gao, Asia FX Strategist at Scotiabank.
    Rupiah was heading for its second week of losses on Friday.
Malaysian markets were shut for a holiday. 
The following table shows rates for Asian currencies against the
dollar at 0522 GMT.

  Change on the day at                           
        0522 GMT                            
  Currency                Latest  Previous    Pct
                             bid       day   Move
  Japan yen              111.820    112.46  +0.57
  Sing dlr               1.349      1.3495  +0.04
  Taiwan dlr             30.210     30.208  -0.01
  Korean won             1137.80    1132.7  -0.45
  Baht                   33.100      33.13  +0.09
  Peso                   50.880      51.08  +0.39
  Rupiah                 13338.0     13279  -0.44
  Rupee                  64.985      64.81  -0.28
  Ringgit*               4.196       4.196  +0.00
  Yuan                   6.588      6.5922  +0.07
 *Closed for market                              
 Change so far in 2017                           
  Currency               Latest   End 2016    Pct
                         bid                 Move
  Japan yen              111.820    117.07  +4.70
  Sing dlr               1.349      1.4490  +7.41
  Taiwan dlr             30.210     32.279  +6.85
  Korean won             1137.80   1207.70  +6.14
  Baht                   33.100      35.80  +8.16
  Peso                   50.880      49.72  -2.28
  Rupiah                 13338.0     13470  +0.99
  Rupee                  64.985      67.92  +4.52
  Ringgit*               4.196      4.4845  +6.88
  Yuan                   6.588      6.9467  +5.45

 (Reporting by Anusha Ravindranath in Bengaluru; Editing by Kim
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