South Korean won down on intervention caution

* Won down on dollar short-covering, intervention caution

* Foreigners post biggest daily stock purchase in 2 years

* Seen rebounding on foreign money inflow (Updates to domestic close)

SEOUL, Sept 18 - The South Korean won fell against the dollar on Friday as heightened caution over possible-dollar buying intervention and a rebound in the U.S. currency caused investors to cover dollar-short positions.

The won, however, found relief from exporters' demands for settlements and as foreign investors posted their biggest daily net purchase in the main stock market in almost two years.

The local currency is expected to head north again on foreigners' continuous appetite for the country's assets although the authorities are likely to slow the won's gains, analysts said.

"Today's fall is just a small correction as investors took a little pause after a big rally. The won's bullish trend is intact," said Jeong My-young, a currency strategist at Samsung Futures Inc.

"Even if stocks fall, the won will follow that very slowly as many players are waiting for chances to buy the won on dips," she added.

The South Korean unit was quoted at 1,206.9/8.9 per dollar as of 0600 GMT, compared with Thursday's domestic close of 1,204.8.

The won gained 1 percent for the week when the local currency hit 11-month highs.

Foreign investors bought a net 1.38 trillion won worth of stocks on the main exchange, the biggest daily net purchase since Oct. 11, 2007.

They bought a combined net 3.52 trillion won during the previous 10 consecutive sessions.

Seoul shares ended up 0.25 percent.

To reduce the impact of the massive inflow of foreign money on the won, the foreign exchange authorities are expected to absorb dollar offers, analysts said.

"The BOK (Bank of Korea) is unlikely to allow for further dips. Otherwise, South Korea will tend to lose its export competitiveness as a result," said Daniel Soh, a strategist at FORECAST Pte Ltd.

0600 GMT 0005 GMT Prev close Won 1,206.9/8.9 1,206.8/7.7 1,204.8 Yen/won 13.2580/16 13.2296/69 13.2117/24 KOSPI 1,699.71 1,701.67 1,695.47