Emerging FX-Asia mostly firm, baht eases after bombings

SINGAPORE, Jan 3 (Reuters) Most Asian currencies firmed on Wednesday against the dollar as liquidity picked up after the New Year holidays, while the Thai baht fell slightly following the deadly bombings in Bangkok.

Analysts expect most Asian currencies to continue to gradually strengthen against the dollar in 2007, thanks to the region's solid economic picture and despite worries of official intervention and capital controls to try to slow the pace of appreciation.

''Asian currencies start the year on a good note with strong rallies in equities and a weaker dollar,'' said Thio Chin Loo, currency strategist at BNP Paribas.

''The baht is defensive with bombings over the New Year and investor attention is focused elsewhere,'' she said.

The Thai baht was quoted as high as 35.45 per dollar in early trade but retreated to 36.20 in the first trading session after deadly bomb blasts in Bangkok on New Year's Eve.

The baht was traded around 36.08 in late trade in Asia on Friday.

Asia's best-performing currency against the dollar in 2006 has been under pressure in recent weeks after the Bank of Thailand moved to impose capital controls to cap its strength.

A trader in Bangkok said the blasts -- the latest scare for investors following a tumultuous year for the country -- would hurt sentiment towards the baht, but a second trader said investors may have digested the news after the blasts.

Thailand's benchmark stock index opened almost 4 percent down on Wednesday in their first reaction to the bomb blasts in Bangkok with investors selling big cap shares due to fears of new political instability.

The blasts killed three and wounded 38. Thailand's prime minister said intelligence pointed to former politicians who had lost power but added that the government did not know who was responsible.

Thai markets were closed on Monday and Tuesday for New Year holidays, giving investors some time to watch events unfold before trade resumed on Wednesday. The stock market was Asia's worst performer in 2006 with a fall of 4.75 percent.

Just two weeks ago, the stock market plunged 15 percent in one day after the central bank introduced foreign exchange measures aimed at curbing the strength of the baht, which rose almost 14 percent in 2006.

Bank of Thailand Governor Tarisa Watanagase said last week that the bank would monitor the baht and keep reviewing the impact of its tough capital control measures first introduced on Dec. 19 until around mid-January.

The South Korean won eased slightly to around 926 per U.S.

dollar while the Singapore dollar was quoted as strong as 1.5290 per U.S. dollar, hitting its highest in more than nine years.

The Philippine peso was quoted as high as 48.8 per dollar, steadying at its highest level in almost six years.

The Indonesian rupiah was quoted around 8,965 per dollar after strengthening beyond the 9,000 per-dollar level on Friday for the first time in 7-{ months.

REUTERS SP RK0930