* Asian currencies set to remain sluggish for rest of year
* Korean won and Indonesian rupiah to outperform, gain 6-7 pct by year-end
* NZ dollar set for further losses on carry trade aversion
By Susan Fenton
HONG KONG, Nov 5 (Reuters) - Asian currencies are likely to stay sluggish until the end of the year as the continent feels the impact of a stuttering global economy and investors remain wary of emerging markets, a Reuters poll shows.
"We're seeing a slight improvement in risk appetite but we're seeing a lot of negative (economic) numbers," said Irene Cheung, Asia economist at ABN Amro in Singapore. "The U.S. dollar is still the number one."
Analysts see 6-7 percent gains for the South Korean won and the Indonesian rupiah emerging Asia's most bruised currencies, but that would hardly mark a revival: both have shed around 15 percent since the collapse of Lehman Brothers in mid-September and trade is likely to remain volatile.
Reduced risk appetite meanwhile will continue to drag down carry trade favourite the New Zealand dollar which is headed for an 8 percent drop by the end of December.
Most other currencies will end the year close to where they are now but downside pressure will be greater on those of export-oriented Taiwan and Singapore with both forecast to drop 2 percent, the poll shows.
The Korean won -- down more than 30 percent this year -- is poised to reach 1,200 to the U.S. dollar by the end of December, from around 1,271 on Wednesday, according to the poll, which was taken before the U.S. presidential election.
Seoul's currency swap with the United States and hopes that falling commodity prices will produce a surplus on its current account should underpin the won. However, gains will be capped by slowing exports and concern that some Korean firms could become insolvent amid a potential global recession, analysts said.
The rupiah is poised to strengthen to 10,000 to the dollar by the end of the year, from around 10,780 on Wednesday, as Indonesia's economy is less export reliant than its neighbours, offering some insulation from a global downturn. But analysts said it remains a risky bet and prone to abrupt shifts in global risk appetite.
INFLATION EASES
Citigroup cites Indonesia, South Korea, India and the Philippines as most vulnerable to sudden reversals in fund flows in emerging Asia.
"Asian currencies have been weak in the past few months because people have been reducing their risk," said Yiping Huang, Citigroup's Hong Kong-based chief Asia economist.
While Asia's financial markets have rebounded in the past two weeks, receding risk aversion may not be sustainable if Western financial markets don't stabilise soon, he said.
Recent export and manufacturing data suggests the global downturn is affecting Asia more quickly than expected. Citigroup expects GDP growth in emerging Asia to decelerate to 7.2 percent in 2009 from an estimated 8.9 percent this year but warns of substantial downside risk.
India, with its large domestic economy, is better placed to withstand a global slump but a widening current account deficit and a volatile stock market will weigh on the Indian rupee which hit a record low of 50.29 to the U.S. dollar on Oct. 27. It is likely to end the year at 49.00, a level it traded at this week.
As inflation has begun to ease, Asian central banks, including India and Taiwan, have cut interest rates to support growth, adding to currency depreciation.
Taiwan's export growth was at a six-year low in September and the Taiwan dollar -- which hit a 10-year high at 30.26 to the U.S. dollar on the election of China-friendly President Ma Ying-jeou in March -- is seen sliding to 33.4 to the U.S. dollar by year-end, from around 32.78 on Wednesday.
But currency weakness is unlikely to spur Asian exports much now that consumer spending is falling in all three big markets -- the United States, Europe and Japan -- economists say.
Singapore's export-oriented economy is in recession -- usually defined as two quarters of falling growth -- and the Singapore dollar which has shed 9 percent since July is set to fall to 1.50 to the U.S. dollar in the next two months, from around 1.47 on Wednesday.
As reduced risk appetite continues to prompt unwinding of carry trades, the New Zealand dollar which has plunged from a 23 year post-float high of $0.8215 in March to around $0.6130 on Wednesday, is set to fall to $0.5650 by year-end.
"The risks are all to the downside, we'll probably see a bit of a recovery in line with equity markets and risk appetite, but the bigger picture of a global recession will support the safe haven currencies such as the dollar and yen and keep bounces in the kiwi limited," said Bank of New Zealand currency strategist Danica Hampton. (Additional reporting by Varsha Tickoo in Kuala Lumpur; Cheon Jong-woo in Seoul; Lee Chyen Yee in Taipei; Rosemarie Francisco in Manila; Vithoon Amorn in Bangkok; Saikat Chatterjee in Mumbai; Gyles Beckford in Wellington; Koh Gui Qing and Kevin Yao in Singapore) (Editing by Jan Dahinten)