EM ASIA FX-U.S. tightening prospects slap Asia FX, bonds; won hits 3-1/2-month low

* Bond outflows, Korea political scandal hurt won

* Yuan rebounds, but on course for 4th weekly slide

(Adds text, updates prices)

By Jongwoo Cheon

SINGAPORE, Oct 28 (Reuters) - Most emerging Asian currencies

eased on Friday as solid U.S. economic data cemented

expectations of a Federal Reserve's interest rate hike in

December, hurting regional bonds.

South Korea's won hit a 3-1/2-month low as

foreign investors continued to sell domestic bonds, while Seoul

shares saw outflows amid as President Park Geun-hye

faced deepening political difficulties after apologising for

letting a friend view her speeches before they were delivered.

The Thai baht slumped as foreign investors kept

selling local stocks and bonds.

Regional units recovered some earlier losses as the dollar

retreated against a basket of six major currencies and

China's yuan rebounded.

Still, their outlook stayed bearish on solid prospects of a

Fed tightening. Upbeat U.S. data on Thursday including jobless

claims and pending home sales added to views that the U.S.

central bank may tighten monetary policy by year-end.

U.S. Treasury yields rose and most emerging Asian countries

government bond yields followed them.

"We reiterate our bias for USD strength against most

currencies including Asian currencies," Christopher Wong, a

senior FX strategist for Maybank, wrote in a note.

"The market could be at risk of underpricing the Fed's

meetings beyond December," Wong said, adding investors are

pricing in U.S. interest rate increase of only 35 basis points

for the next 12 months including December.

The third-quarter U.S. economic growth data due later in the

day may provide further clues to what the Fed will do.

BOND SELLOFF, POLITICS HIT WON

The won on Friday hit 1,147.5 per dollar, its weakest since

July 14, while it pared some of earlier losses on exporters'

demand for month-end settlements.

The South Korean currency led weekly losses among emerging

Asian currencies, having fallen 0.8 percent against the dollar

so far this week.

Foreign investors sold a nearly 1 trillion won ($874.2

million) worth of the country's bonds in the first 27 days of

October, preliminary data from a financial regulator showed.

Offshore investors have been cutting South Korean bond

holdings in recent months on waning expectations for a central

bank interest rate cut and doubts over further appreciation in

the won.

Sentiment deteriorated as President Park's popularity

plunged to a record low on allegations that an old friend

enjoyed inappropriate influence over her.

"The issue provided another excuse foreign investors to sell

bonds when they need to adjust their global portfolio with U.S.

interest rates expected to rise," said Keonhyeong Ha, an

economist at Shinhan Investment Corp in Seoul.

"Some long-term foreign investors are banned from investing

in countries, which face such scandals," Ha added.

A South Korean finance ministry official told Reuters

earlier that recent foreign sales of the country's bonds are

unrelated to the current political issues.

Political crisis often hurt investors' sentiment. Last year,

Malaysia suffered massive bond outflows when Prime Minister

Najib Razak was hit by a corruption scandal at state fund

1Malaysia Development Berhad (1MDB).

Among other regional currencies, the yuan has eased 0.2

percent on the course for a fourth straight weekly depreciation

on fears of capital outflows.

The Philippine peso has lost 0.3 percent as

foreign investors were net sellers in the local equities

over the previous four straight sessions.

Malaysia's ringgit has also slumped 0.3 percent as

lower crude prices bode poorly for the country's oil and gas

revenues.

Oil prices were set to report a weekly loss of more than 2

percent due to uncertainty whether OPEC would be able to

coordinate a production cut big enough to curb global

oversupply.

CURRENCIES VS U.S. DOLLAR

Change on the day at 0430 GMT

Currency Latest bid Previous day Pct Move

Japan yen 105.15 105.28 +0.12

Sing dlr 1.3939 1.3949 +0.07

Taiwan dlr 31.607 31.637 +0.09

Korean won 1143.93 1142.50 -0.13

Baht 35.11 35.05 -0.17

Peso 48.470 48.470 0.00

Rupiah 13039 13032 -0.05

Rupee 66.87 66.86 -0.01

Ringgit 4.1945 4.1810 -0.32

Yuan 6.7791 6.7810 +0.03

Change so far in 2016

Currency Latest bid End prev year Pct Move

Japan yen 105.15 120.30 +14.41

Sing dlr 1.3939 1.4177 +1.71

Taiwan dlr 31.607 33.066 +4.62

Korean won 1143.93 1172.50 +2.50

Baht 35.11 36.00 +2.53

Peso 48.47 47.06 -2.91

Rupiah 13039 13785 +5.72

Rupee 66.87 66.15 -1.07

Ringgit 4.1945 4.2935 +2.36

Yuan 6.7791 6.4936 -4.21

(Reporting by Jongwoo Cheon; Editing by Simon Cameron-Moore)