* Will Geithner's rebalancing plan gain supporters at G20?
* Tech, consumer sectors lift Asia stocks
* Emerging market stock funds suck in $3.76 bln in
week-EPFR
By Kevin Plumberg
HONG KONG, Oct 22 (Reuters) - The dollar fell on Friday on
speculation a U.S. plan that included letting undervalued
currencies strengthen would gain support at a contentious
weekend Group of 20 meeting, lifting gold and oil prices.
Major European stocks opened lower, with Britain's FTSE 100
<> down 0.1 percent, France's CAC 40 <> down 0.5
percent and Germany's DAX <> off 0.3 percent. The
FTSEurofirst 300 <> opened 0.1 percent lower.
A positive outlook from LG Display <034220.KS>, the world's
No. 2 LCD flat screen maker, spurred a rally in shares in the
technology sector and pushed up Asian stocks, which are headed
for the first weekly decline in two months. []
G20 nations should refrain from currency policies aimed at
gaining a competitive edge and aim to keep trade imbalances
contained, U.S. Treasury Secretary Timothy Geithner said in a
letter to finance chiefs in the group who are meeting in
Gyeongju, South Korea. Canada said it supported the proposals.
[][]
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, at stake in the G20 meeting is
whether to keep alive what has been a dominant trade since
September of selling dollars to buy emerging market equities,
commodities and longer maturity bonds. So far on Friday,
dealers have been willing to add to the trade.
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,
reversed early gains and fell 0.2 percent <=USD>.
Dealers have spent most of 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 1.1 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
grew 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 already 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 1 percent climb in
the technology sector while consumer staples and financials
were drags.
LG Display <034220.KS> sparked some buying of the sector
after it said the LCD industry was nearing a bottom as the pace
of panel price falls slows, after reporting its worst profit in
six quarters. []
The MSCI 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 0.7 percent to
$81.13 a barrel <CLc1> as the dollar fell, keeping an inverse
relationship between the two assets tight. The 30-day
correlation between the dollar index and front-month oil
futures was 0.9, meaning the two have been moving in opposite
directions.
Gold edged up 0.2 percent to $1,326.65 an ounce <XAU=>,
though it has dipped significantly since hitting a record high
of $1,387.10 last Thursday. The stable dollar and profit taking
have 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)
