* Dollar plumbs new lows after Singapore currency move
* UN body warns currency war threatens investment recovery
* Seoul and Tokyo in tit-for-tat spat ahead of G20
* US Treasury report on China currency practices due Friday
By Yoo Choonsik and Nopporn Wong-Anan
SEOUL/SINGAPORE, Oct 14 (Reuters) - Singapore widened the trading band for its currency in response to rising market volatility and South Korea exchanged barbs with Japan as foreign exchange tensions persisted ahead of a G20 meeting next week.
The dollar, under pressure for weeks on expectations the U.S. Federal Reserve will soon print money again to buoy its faltering economy, fell sharply against a range of currencies on Thursday after the surprise move by Singapore.
Emerging market governments are in a policy bind because of an influx of footloose global capital seeking higher returns than the near-zero interest rates on offer in the developed world, which is driving their currencies up and threatening their export bases.
The flows are exacerbating imbalances that policymakers fear could stall a recovery from the deep downturn caused by the global financial crisis and could even lead to a wave of protectionist policies which would wreak further damage.
Verbal jousting from policymakers has intensified in the run-up to a meeting of Group of 20 finance ministers in South Korea next week and a leaders summit in Seoul on Nov. 11-12.
The United Nations Conference on Trade and Development (UNCTAD) warned that a recovery in global investment was now threatened by the spectre of a currency war.
"We have seen recently fluctuations of major currencies in a significant manner. There is a danger of a currency war," said James Zhan, director of UNCTAD's investment and enterprise division.
As a result foreign direct investment -- a key source of finance for developing countries -- is likely to stagnate this year at about $1.1 trillion, one quarter below its level in the years running up to the financial crisis, said Zhan.
European Union Monetary Affairs Commissioner Olli Rehn cautioned on a visit to Moscow that disorderly exchange rate movements could have "very adverse implications" for economic and financial stability and pressed countries with undervalued currencies to allow them to appreciate.
Like Rehn, European Central Bank policymaker Christian Noyer played down talk of a currency war but took a swipe at countries like China who are keeping their currencies from rising.
"That penalises Europe, that penalises the United States, that penalises the entire world," Noyer told France's RTL radio.
DOLLAR HITS NEW LOWS
Singapore widened the trading band for the Singapore dollar for the first time since just after the Sept. 11, 2001 attacks on the United States -- a move analysts said gave it more flexibility to react to a tide of hot money flowing in.
The move propelled the local currency to a record high and helped push the U.S. dollar to a new 15-year low under 81 yen, a 28-year low against the Australian dollar and its weakest level in over eight months against the euro.
Underscoring the strains, state media in South Korea reported Seoul had complained to Japan after Tokyo questioned its leadership of the G20 forum of major economies because of repeated intervention to curb the won.
Seoul was angered by unusually direct remarks on Wednesday by Japanese Finance Minister Yoshihiko Noda, who said emerging market countries with current account surpluses, like China and South Korea, should allow their currencies to be more flexible.
The spat has embarrassed South Korea in the run-up to the G20 meeting.
"It is inappropriate to talk about a certain country's foreign exchange policy unilaterally," Bank of Korea Governor Kim Choong-soo told reporters.
Japan itself intervened in the currency market last month for the first time in more than six years to try to stem a rise in the yen that threatens its fragile economic recovery.
The next flashpoint will be on Friday, when the U.S. Treasury Department is expected to make its semi-annual ruling on whether China is deliberately manipulating its exchange rate.
Beijing would take such a move as another slap in the face by the West on the heels of the award of the Nobel Peace Prize to Chinese dissident Liu Xiaobo.
The United States has not formally branded China a currency manipulator since 1994 and a ruling against it would be a shock despite growing anger from U.S. politicians who accuse Beijing of "stealing jobs" by keeping the yuan artificially cheap.
The Chinese central bank, which keeps the yuan's exchange rate on a short leash, let the currency creep up on Thursday to 6.6562 per dollar, the highest level since it abandoned a decade-old peg to the U.S. currency in July 2005.
On Wednesday, China handed ammunition to critics of its heavy intervention to hold down the yuan by reporting that its foreign exchange reserves soared a record $194 billion in the third quarter to hit $2.65 trillion.
Visiting Beijing, Senate Finance Committee Chairman Max Baucus said the upper chamber was poised to follow the House of Representatives and pass legislation to correct the undervaluation unless Beijing acted.
He said that if China allowed the yuan to find its true value, up to 500,000 new U.S. jobs could be created.
But Andy Rothman, an economist at investment bank CLSA in Shangha said production would shift to other low-cost countries, not back to the United States, if China became too expensive.
"There is nothing Beijing can do to satisfy U.S. politicians who are using the (yuan) as a gimmick to distract angry voters from Washington's own policy and regulatory disasters," he said. (Writing by Noah Barkin and Alan Wheatley, editing by Mike Peacock)