* Authorities to inspect FX derivatives positions at banks
* Move comes as emerging economies face rapid fund inflows
* Won falls as move seen as aiming to cap currency gains
* Inspection of banks scheduled for Oct. 19 to Nov. 5 (Updates market reaction, adds background)
By Yoo Choonsik and Cheon Jong-woo
SEOUL, Oct 5 (Reuters) - South Korea warned investors on Tuesday it may impose further limits on forward trading as emerging economies grapple with hot money inflows that are pushing up their currencies.
The move comes after Brazil on Monday doubled a tax on foreigners' purchases of local bonds and days before a meeting of Group of Seven finance ministers at which currencies are likely to be a main topic of discussion.
The United States has said China distorts the global economy by undervaluing its currency, but many emerging economies blame ultra-low interest rates in rich countries for fund inflows to their markets.
The Bank of Korea and the Financial Supervisory Service said they would jointly inspect foreign exchange derivatives positions at banks operating in the country later this month and may impose fresh measures depending on the results.
The won
"I interpret it as an attempt to use regulation to deter banks from speculating on the won's appreciation," said Tim Condon, head of Asia research at ING in Singapore.
In principle, the inspection plan is not unusual because the authorities have already said they would carry out occasional inspections when they unveiled restrictions on currency derivative positions at banks in June.
The checks, to be conducted from Oct. 19 to Nov. 5, will be on banks' currency forward positions such as non-deliverable forwards (NDFs) and forward trading details such as with whom banks entered into deals and on what purposes.
"After the inspection, we may take action such as putting further limits on forward positions," Lee Hoo-myung, head of the finance ministry's foreign exchange policy division, told Reuters. The ministry is the top foreign exchange authority.
Brazil's finance minister has said the world is in an "international currency war" as governments manipulate their currencies to improve their export competitiveness.
Japan spent 2.1 trillion yen ($25.18 billion) on currency intervention in the month to Sept. 28 after it intervened in the market for the first time in six years on Sept. 15 amid worries a surging yen would derail a fragile economic recovery.
G7 finance ministers will discuss economic growth issues and inflexible currencies this week, according to Canadian Finance Minister Jim Flaherty, who will chair the informal gathering on Oct. 8 in Washington.
Currencies are also expected to be discussed at an annual International Monetary Fund meeting, also to be held in Washington this week. (Writing by Kazunori Takada; Editing by Ron Popeski)