* No breakthrough on currency tensions seen at G20
* Dollar weakness, commodities strength may resume post G20
* Emerging market stock funds suck in $3.76 bln in
week-EPFR
By Kevin Plumberg
HONG KONG, Oct 22 (Reuters) - Dealers trimmed bets against
the U.S. dollar on Friday ahead of a contentious G20 meeting,
while a rally in technology shares supported Asian stocks,
which are headed for the first weekly decline in two months.
Finance ministers from advanced economies in the Group of
20 are going to Gyeongju, South Korea to ask emerging markets
to allow their currencies to strengthen more and to peddle a
plan on capping current account balances.
However, developing economies such as China may be cool to
the idea of letting their currencies fly when the Federal
Reserve is discussing a new round of quantitative easing.
[]
For financial markets, that means status quo may rule and
also the dominant trade since September of selling dollars to
buy emerging market equities, commodities and longer maturity
bonds is still alive.
Citi's currency strategists recommended adding to bets
against the dollar ahead of the weekend.
"We believe that timing is right to add additional short
USD exposure vs. EUR," they said in a note. "Since we believe
that apparent widespread expectation for coordinated action to
manage the USD's decline will not be met, we suspect that
disappointment could translate into a further broad based
decline in USD."
The U.S. dollar index, which measures the dollar's
performance against a basket of six other major currencies, was
up 0.2 percent <=USD>, though still not far from a low for the
year struck last Friday.
Dealers have spent the week taking profits on their bets on
emerging Asian currencies, particularly after China raised
interest rates for the first time since 2007 on Tuesday,
sparking fears about the impact on growth.
The dollar is up 1.8 percent on the week against the Korean
won <KRW=> and 0.9 percent against the Malaysian ringgit
<MYR=>.
EMERGING MARKETS BONANZA
The main reason for the upward pressure on emerging market
currencies has been that capital flows into these high-growth
regions have been torrential since September, when expectations
that the Fed will basically have to print dollars to buy more
assets and pull down market rates.
Indeed, global emerging market equity funds absorbed a net
$3.76 billion in new money while emerging market bond funds
took in more than $1 billion in the week ended Oct 20, fund
tracker EPFR Global said in a note. With more than two months
to go until the end of the year, inflows to emerging markets
have exceeded 2009.
A prime example of hunger for exposure to emerging Asia was
the pricing of the initial public offering of AIA, the Asian
life insurance arm of American International Group Inc <AIG.N>,
at the top of an expected range, according to sources.
[]
"This is a cost effective way for IPO investors to ride
China's growth," said Francis Gaskins, president of
IPOdesktop.com in Marina del Rey, California.
In the equity markets, Japan's Nikkei share average edged
up 0.4 percent in thin trade <>, with prices driven higher
by dealers closing out of bets against stocks.
The MSCI Asia Pacific ex-Japan index was largely unchanged
on the day <.MIAPJ0000PUS>, supported by a 0.4 percent climb in
the technology sector while consumer staples and financials
were drags.
The index was on track for a 1.3 percent fall for the week,
the first weekly decline since the week ended August 29.
Commodity traders pushed up oil prices 0.6 percent to
$81.00 a barrel after a batch of new U.S. data overnight
painted a picture of an economy stuck in slow-growth mode,
reinforcing views the Federal Reserve will ease monetary policy
further next month to try to reinvigorate the recovery.
Gold edged up 0.2 percent to $1,326.15 an ounce <XAU=>,
though has dipped significantly since hitting a record high of
$1,387.10 last Thursday. The stable dollar and profit taking
has pulled gold down 3.1 percent so far this week for what
would be the biggest weekly decline since July.
(Additional reporting by Denny Thomas and Kennix Chim in HONG
KONG, editing by Miral Fahmy)
