* Emerging markets rebound, Japan remains in focus
* South Africa rand, Polish zloty biggest FX losers
* Dollar/dinar one-year forwards rise on Bahraini unrest
By Sebastian Tong
LONDON, March 16 (Reuters) - Emerging markets steadied on
Wednesday after the previous day's losses but remain vulnerable
to another selloff while Japan battles to contain leaking
radiation from a quake-damaged nuclear complex in its northeast.
South Africa's rand tumbled to near three-week lows to the
dollar on fears Japanese funds would repatriate capital from
overseas and one-year dollar/Bahraini dinar forwards spiked up
as authorities persisted with a violent crackdown on protesters.
Japanese shares led a rebound in the Asian session, boosted
by short covering and bargain hunting after a two-day rout.
The Federal Reserve also bolstered sentiment when it
reiterated on Tuesday that it would support the U.S. economy by
keeping its key rates "exceptionally low" for "an extended
period". []
"We will be focused on Japan for a while and that has
serious implications for assets around the world. Japanese
capital has intense links with other emerging markets," said
Luis Costa, head of CEEMEA debt and forex strategy at Citi.
The emerging equity benchmark <.MSCIEF> rebounded 0.8
percent by 1205 GMT to recover from Tuesday's near five-week
lows while emerging sovereign debt <11EMJ> narrowed 1 basis
point to trade at 273 bps over U.S. Treasuries.
Czech shares <> firmed from three-month lows on Tuesday
while South African shares <.JTOPI> rallied over 1 percent after
skidding to 15-week lows in the previous session.
Russian shares <> climbed 0.8 percent higher from
Tuesday's three-week lows and Turkish shares <> firmed
half a percentage point to three-week highs.
Uncertainty over Japan's ability to prevent a major
radiation leak from its stricken Fukushima nuclear plant is
likely to continue to limit market gains. Aftershocks from
Friday's massive earthquake are still rattling Tokyo and
recovery efforts are underway in Japan's tsunami-hit northeast
coast. []
REPATRIATION FEARS
Brazil was the third-largest source of foreign bonds held by
Japan-based investment funds at $20.9 billion, Thomson Reuters
data shows. []
"The rand, the Brazilian real and to some extent, the Polish
zloty -- these are emerging market pockets that have been
explored by Japanese retail money and exposed to repatriation
flows," said Citi's Costa.
Fears of a repatriation of Japanese overseas capital fuelled
a selloff in the rand, which slipped 0.3 percent <ZAR=> against
the greenback.
The zloty <EURPLN=> was also among the day's biggest
currency losers, shedding 0.5 percent against the euro, to stay
near Tuesday's 3-1/2 month lows.
Below-forecast Polish inflation figures added pressure on
the zloty as they raised doubts Poland's central bank would
raise interest rates next month. []
An increasingly violent confrontation between Bahraini
government forces and an uprising backed by the island's Shi'ite
Muslim majority pushed the Bahrain dinar to a multi-year low in
the forwards market. One-year dollar/dinar forwards <BHD1Y=>
were quoted as high as 200 points, the highest level since at
least the year 2000, a senior bank trader said. []
The rise suggests investors are increasingly betting on a
depreciation of the country's pegged currency.
Popular uprisings in the Middle East have dented sovereign
credit ratings in the region. Moody's on Wednesday cut Egypt's
raing to Ba3, just above junk, while Bahrain had its rating cut
to BBB by Fitch late on Tuesday.
(Additional reporting by Sujata Rao; editing by Susan Fenton)
