EM ASIA FX-Rupiah dips with stocks, ringgit NDF curve stays flat

* Rupiah falls 1 pct as foreign investors dump local assets

* Ringgit weaker, NDF curve stays flat ahead of Fed meeting

Kevin Yao

SINGAPORE, Nov 2 - The Indonesian rupiah and Malaysian ringgit slipped on Monday as falling stocks spurred by the failure of U.S. lender CIT Group encouraged investors to unwind their short dollar bets.

The Australian and New Zealand dollars also fell early in the session partly due to a correction to their rallies of the past few months and soured market sentiment from news that CIT Group filed for bankruptcy.

Signalling market jitters, Wall Street's favourite pulse of investor sentiment, the Chicago Board Options Exchange Volatility Index, or VIX, rocketed 23.95 percent higher to 30.69 on Friday, the highest level since July.

The Philippine market was shut for holiday.

RUPIAH

The Indonesian rupiah fell as much as 1 percent to 9,630 per dollar as hedge funds and other offshore investors sold local stocks and central bank debt.

Jakarta shares lost 1.5 percent at 0541 GMT.

"SBI (central bank debt) is the most liquid asset but offshore dollar demand now is via stocks," said a Jakarta-based trader. "Government bonds are not very liquid -- when investors want to sell bonds to take profits, buyers are not available in the market."

Investors are waiting for inflation data, due later on Monday. It is the last reading before a policy review on Wednesday when the central bank is expected to keep interest rates on hold.

The offshore forward market was rangebound, with three-month dollar/rupiah NDFs hovering around 9,705, implying a 1 percent rupiah fall from the spot rate compared to 1.8 percent on Friday.

"I don't see much activity and the NDF curve remains the same as last Friday," said a Singapore-based trader.

RINGGIT

The ringgit shed 0.8 percent to 3.4365 per dollar.

"Dollar is bid all around due to the equity crash last Friday," said a Kuala Lumpur-based trader, referring to sharp falls in stocks on Wall Street.

Meanwhile, three-month dollar/ringgit NDFs rose to 3.4365, implying little change from the spot rate.

CIMB strategist Suresh Ramanathan said any hawkish tone from the U.S. Federal Reserve at this week's policy meeting will indicate a higher dollar LIBOR rate on NDF implied yields.

"The market may need spot dollar/ringgit to be reflective of further gains to cover the potential rise in funding costs in these trades," he said. "As the NDF curve stays flat, my guess is probably the market is still giving more weight to the Fed factor rather than jumping into the CIT news."

The Fed is widely expected to keep its benchmark interest rate near zero even though the U.S. economy may have turned a corner after the deepest recession in some 70 years. CURRENCIES VS U.S. DOLLAR Change on the day at 0542 GMT Currency Latest bid Previous day Pct Move Japan yen 90.00 90.08 +0.09 Sing dlr 1.3988 1.4024 +0.26 Taiwan dlr 32.560 32.535 -0.08 Korean won 1182.30 1182.50 +0.02 Baht 33.43 33.41 -0.06 Rupiah 9590.00 9540.00 -0.52 Rupee 46.96 46.96 +0.00 Ringgit 3.4275 3.4100 -0.51 Yuan 6.8277 6.8275 -0.00 Change so far in 2009 Currency Latest bid End prev year Pct Move Japan yen 90.00 90.60 +0.67 Sing dlr 1.3988 1.4340 +2.52 Taiwan dlr 32.560 32.860 +0.92 Korean won 1182.30 1259.50 +6.53 Baht 33.43 34.80 +4.10 Peso 47.63 47.52 -0.23 Rupiah 9590.00 11000.00 +14.70 Rupee 46.96 48.71 +3.73 Ringgit 3.4275 3.4500 +0.66 Yuan 6.8277 6.8230 -0.07