EMERGING MARKETS-Asian FX edges higher as traders reassess US rate cuts amid tariff threats

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By Rajasik Mukherjee and Roushni Nair

Feb 20 (Reuters) - Most Asian currencies nudged higher on Thursday, with the Malaysian ringgit and South Korean won leading gains, as investors reassessed U.S. policymakers' reluctance to cut rates amid President Donald Trump's potentially inflationary tariffs.

Trump said on Wednesday that he will announce tariffs related to imports of timber, cars, semiconductors and pharmaceuticals "over the next month or sooner".

A trade dispute between the U.S. and its major partners, particularly China, Southeast Asia's largest trading partner, could negatively impact economic growth and markets, prompting investors to factor this risk into their portfolios.

The Thai baht THB=TH and the ringgit MYR= rose modestly by 0.24% each, while the won KRW=KFTC advanced 0.3% to its highest point since January 24.

The U.S. dollar index USD=, which tracks the currency against six major counterparts, fell marginally by 0.2% to 106.97 after rising in the past two sessions.

Equity markets in the region declined following the release of minutes on Wednesday from the U.S. Federal Reserve's January 28-29 policy meeting, which revealed officials' concerns over the inflationary effects of Trump's policies.

Thai stock exchange .SETI, the worst-performing index in the region for 2025, lost 0.5%, whereas shares in Manila .PSI declined by nearly 1%.

Equities in Kuala Lumpur .KLSE inched 0.4% lower, while those in Singapore .STI and Indonesia .JKSE traded flat.

After an unexpected 25 basis-point rate reduction in January, Bank Indonesia (BI) held rates steady as anticipated, while signalling the possibility of further rate cuts.

"We maintain our view that monetary policy is likely to do more of the heavy lifting in supporting growth this year as the government's focus remains on fiscal consolidation," Radhika Rao, senior economist with DBS Bank, said in a note.

The Indonesian rupiah IDR= depreciated by as much as 0.2% earlier in the day but is currently trading flat. One of the region's worst performers, the currency is on track for a third consecutive session of decline.

DBS expects BI to cut rates by at least 50 basis points in the first half of 2025, with the timing dependent on rupiah movements and U.S. Federal Reserve actions amid signs of stalled disinflation.

Among other news, Vietnam's parliament approved an upgradation to its 2025 growth target while providing support to major infrastructure projects.

The stock index .VNI gained as much as 0.5% to hit its highest level since October 14 while the local currency traded nearly flat.

HIGHLIGHTS:

BOJ to raise rates once more this year to 0.75%, most likely in Q3

Malaysia's January exports rise 0.3% y/y, below forecast