Emerging Asia FX-Slightly weaker on BOJ expectations

SINGAPORE, July 12 (Reuters) Asian currencies were marginally weaker on Wednesday, on the eve of a 2-day Bank of Japan policy meeting that could result in Japan's first rate rise in 6 years and cause the yen to rally.

The South Korean won slipped about 0.20 percent to 948 per dollar. The Taiwan dollar initially fell about a quarter of a percent to levels around 32.517 and then trimmed some losses.

Other Asian currencies were also marginally lower, despite some hesitation among traders to buy the U.S. dollar ahead of data that could show the U.S. trade deficit in May swelled to its widest in four months.

Analysts, however, differed on the reasons for the light selling of the regional currencies. Some said the weakness in the yen which was about one yen weaker than this week's high of 113.45 per dollar, and the drop in the Asians was a result of concern the Bank of Japan may disappoint the market.

''The market is wary that BOJ may be slow in hiking rates after ending the zero interest rate policy,'' said Philip Wee, DBS Bank's currency strategist.

Other traders pointed to the New Zealand dollar's spike to 3-week highs as evidence the yen was still being used to fund the carry trades, in which investors sell a low-yielding currency to invest in a higher-yielding asset.

SELLING WON FOR YEN Yet, there was some talk that hedge funds and mutual funds had been seen buying the yen and selling won this week, in anticipation of a yen rally after the BOJ decision.

The BOJ is widely expected to lift overnight rates from zero, having reduced excess cash with Japanese banks for months.

The yen-won cross was quoted at 8.29 won per yen on Wednesday, having moved up from lows of 8.17 late last week.

Meanwhile, the Indian rupee eased after seven blasts on the suburban railway network on Tuesday in Mumbai, India's financial hub, giving markets another reason for the weakness in Asian currencies.

One currency analyst said the Mumbai blasts were a domestic issue and should not have any regional impact.

''But everything is quite bid. Maybe there is a bit of risk reduction going on,'' he said.

CURRENCIES VS U.S. DOLLAR Change on the day at 0808 GMT Currency Latest bid Previous day Pct Move Japan yen 114.60 114.26 -0.30 Sing dlr 1.5799 1.5770 -0.18 Taiwan dlr 32.481 32.450 -0.10 Korean won 948.60 946.60 -0.21 Baht 37.85 37.79 -0.16 Peso 52.16 52.23 +0.13 Rupiah 9065.00 9040.00 -0.28 Rupee 46.21 46.18 -0.06 Ringgit 3.6530 3.6470 -0.16 Yuan 7.9924 7.9919 -0.01 Change so far in 2006 Currency Latest bid End prev year Pct Move Japan yen 114.60 117.96 +2.93 Sing dlr 1.5799 1.6625 +5.23 Taiwan dlr 32.481 32.850 +1.14 Korean won 948.60 1011.60 +6.64 Baht 37.85 41.11 +8.61 Peso 52.16 53.09 +1.78 Rupiah 9065.00 9835.00 +8.49 Rupee 46.21 45.04 -2.53 Ringgit 3.6530 3.7790 +3.45 Yuan 7.9924 8.0702 +0.97 REUTERS PV PM1459