Emerging Asia FX-Pulled down by yen weakness

SINGAPORE, June 23 (Reuters) The Japanese yen's drop of more than one percent pulled Asian currencies down on Friday and raised nervousness in a market that had assumed the worst in the emerging market sell-off was over.

The Indonesian rupiah fell nearly a percent to a one-week low of about 9,390 per dollar.

The Singapore dollar shed more than a quarter of a percent to 1.5950/60 per U.S. dollar, giving back more than half the gains it had made since hitting a 2-month low of 1.6015 on Monday.

Asian currencies had rallied earlier this week after Bank of Japan Governor Toshihiro Fukui suggested an early rise in Japan's near-zero rates. But the yen came under pressure after parliament began their questioning of Fukui's personal investments.

Speculation of further U.S. rate rises also buoyed the dollar on Thursday, and that bullish sentiment persisted on Friday.

''There is still more of bull-dollar trend right now,'' said Odie Lee, a trader at Bayerische Hypo und Vereinsbank in Singapore. ''It looks like it is more of a dollar/yen story.'' ''But the interest in emerging market currencies is still there because if you look at the NDFs against implied onshore rates, they are not so much higher,'' Lee said.

Lee said non-deliverable forwards had shown the regionals to be weaker in the offshore market than onshore in May during a heavy bout of selling of emerging market stocks and currencies.

For instance, in mid-May the Korean won NDF market had priced the 3-month won at about 944 per dollar, about 2 won weaker than the onshore 3-month forwards .

On Friday, both offshore and onshore won forwards showed the currency trading at about 956 won per dollar in 3 months. The won was quoted at around 959 per dollar on Friday.

''This is normalising, and it means that interest in the Asian currencies is still there,'' Lee said, referring to the convergence in the onshore and offshore forward rates.

REUTERS SY PM0942