EM ASIA FX-Won hits 15-month high, Asia FX up on Fed easing hopes

Asian currency

The South Korean won hit a 15-month high for the third straight day and most emerging Asian currencies held firm on Wednesday, supported by expectations for more U.S. monetary stimulus.

News of a rocket launch by North Korea caused the won to

trim its gains after hitting a peak of 1,073.6 to the dollar

,its strongest level since September 2011.

But the won still stayed higher on the day, and the North

Korean launch had limited impact on Asian currencies, which have been supported recently by inflows into regional debt and equities markets.

A sharp improvement in German investor morale in December that fanned hopes that Europe's largest economy will avoid recession helped support riskier assets such as emerging Asian currencies, market players said.

"Markets are also anticipating the Fed meeting later today,

in which a lot of people are expecting the Fed to roll its

Operation Twist purchases into open-ended purchases," said Nick Verdi, FX strategist, Asia-Pacific ex-Japan for Barclays in Singapore.

The U.S. central bank, which concludes a two-day policy

meeting later on Wednesday, is seen likely to extend its

purchases of mortgage-backed debt and replace its expiring "Operation Twist" scheme with a new bout of money creation.

Analysts expect the Fed to replace the Treasury purchases

under Twist, which were funded by sales and redemptions of short-term debt, with a fresh $45 billion per month in outright buying of Treasuries, and for the Fed to keep buying a total $85 billion in assets per month.

After the Fed meeting, investors are likely to turn their

focus to negotiations among U.S. lawmakers aimed at avoiding the U.S. "fiscal cliff" of tax hikes and spending cuts that are due to come into effect from early next year.

While market players have generally been optimistic that a

deal will be reached by the end of December, not all are

... contd.

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