Indonesia's rupiah leads Asian FX higher as U.S. inflation concerns ease



* Rupiah at one-month high on the dollar

* Fed, BoJ, Bank Indonesia policy meetings next week

By Nikhil Nainan

June 11 (Reuters) - Indonesia's rupiah led gains across Asia's risk-sensitive currencies on Friday after U.S. inflation data was enough to convince investors that the rise in prices may be temporary.

South Korea's won KRW=KFTC and Thailand's baht THB=TH gained around 0.5% as the dollar nursed small losses following the report. Traders in Asia had been cautious all week as they watched for any signal in the data that may prompt the Federal Reserve to discuss early tapering of its massive stimulus.

U.S. Treasury yields US10YT=RR fell to lows not seen since early March at one point in Asian trade, with traders saying short-covering was driving the rally.

"With the global market backdrop turning more constructive for bond investments, investors may re-focus on yield differentials," OCBC Bank analysts said in a note.

Asia's emerging market currencies and bonds, though considered riskier, traditionally yield more than their peers in developed markets.

The yield on Indonesia's 10-year bonds ID10YT=RR , which offer one of the highest returns in emerging markets, fell to its lowest since mid-February before rebounding to levels seen earlier this week.

With U.S. inflation data out of the way, focus will now turn to the Fed's policy meeting next week, which will happen alongside meetings by central banks of Indonesia, Taiwan and Japan.

Stocks markets in the region also largely gained, with South Korea .KS11 leading the way with a 0.8% rise, while Thailand .SETI , the Philippines .PSI and others rose no more than half a percent.

In a sign of confidence, the Thai central bank allowed banks to pay interim dividends, saying they have sufficient capital to deal with the impact of COVID-19 outbreaks. The country's top banks were up around 1%.

In Singapore, shares .STI were roughly flat and the local dollar SGD= marginally higher.

The city-state plans a phased easing of its COVID-19 restrictions from next week. Although bets on the reopening was largely factored in, analysts say the bank-and-landlord-heavy Singapore benchmark has further room to rise.

Carmen Lee, head of OCBC investment research, said there are sectors "which have not done as well as, and not priced as much of the optimism," adding that the financial sector has done well, but has more upside.

HIGHLIGHT:

** Indonesian 10-year benchmark yields rise 8 basis points to 6.424%​​

** Thailand's 10-year government bond yields fell 2 basis points to 1.67%​​

** S.Korea to begin normalising monetary policy when economy sustains recovery - central bank

Asia stock indexes and currencies at 0632 GMT COUNTRY

FX RIC

FX

FX

INDEX

STOCKS STOCKS

DAILY % YTD %

DAILY % YTD % Japan

JPY=

-0.05

-5.60 .N225 -0.03

5.48 China

CNY=CFXS +0.09

+2.21 .SSEC -0.39

3.56 India

INR=IN

+0.09

+0.11 .NSEI 0.35

12.95 Indonesia

IDR=

+0.39

-1.06 .JKSE -0.03

2.12 Malaysia

MYR=

+0.16

-2.24 .KLSE -0.41

-3.30 Philippines PHP=

+0.06

+0.67 .PSI

0.47

-3.25 S.Korea

KRW=KFTC +0.45

-2.21 .KS11 0.76

13.08 Singapore

SGD=

+0.11

-0.08 .STI

0.06

11.28 Taiwan

TWD=TP

+0.34

+3.16 .TWII 0.32

16.84 Thailand

THB=TH

+0.42

-3.48 .SETI 0.50

12.70
Reporting by Nikhil Kurian Nainan in Bengaluru, additional reporting by Chen Lin in Singapore; Editing by Kenneth Maxwell and Sriraj Kalluvila

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