EMERGING MARKETS-Asian shares climb on US-China trade optimism; currencies steady

By Roushni Nair

May 7 (Reuters) - Asian shares rose on Wednesday, supported by optimism that an upcoming meeting between top U.S. and Chinese officials could ease trade tensions, while regional currencies held steady following recent sharp declines in the dollar.

Equity markets in Manila .PSI, Jakarta .JKSE and Seoul .KLSE climbed 1.2%, 1%, and 0.3%, respectively.

U.S. President Donald Trump said that China wants to negotiate a trade deal to end competing tariffs, adding the economic rivals' leaders would meet "at the right time."

Chinese markets opened higher, buoyed by investor optimism after the central bank disclosed plans to cut the amount of reserves banks must hold by 50 basis points, unleashing about 1 trillion yuan in liquidity to shore up the economy. It will also cut interest rates on the seven-day reverse repurchase agreements by 10 bps.

The Chinese yuan CNY=CFXS rose marginally by 0.1% while equities in Shanghai .SSEC climbed 0.5%.

The South Korean won KRW=KFTC firmed to its strongest level since November 29, strengthening as much as 1.6% to 1,379 per U.S. dollar, after traders returned from an extended holiday.

Asian currency markets have experienced sharp swings recently, with the Taiwan dollar TWD=TP surging 6% against the U.S. dollar over Friday and Monday — its largest two-day gain on record.

Analysts credit speculation around currency appreciation commitments in a potential U.S. trade scenario, though denied firmly by Taiwan's central bank and president, for the sudden capital influx into Taiwan's dollar-heavy, unhedged market.

The U.S. dollar index =USD extended its losing streak to a fourth consecutive session, trading flat at 99.54.

"The trend has been a weaker dollar and that has belatedly come to Asia," said Moh Siong Sim, currency strategist at Bank of Singapore. "Investors are increasingly worried about dollar weakness as they start to manage their overweight dollar positions."

Sim added that "the Asia story will depend on China," noting it remains "difficult to see room for significant Chinese currency appreciation" given high tariffs.

Meanwhile, India and the United Kingdom successfully concluded a free trade agreement, Prime Minister Narendra Modi said on Tuesday.

The deal between the world's fifth- and sixth-largest economies includes a social security pact that Modi said would boost investments and job creation.

The Indian rupee INR=IN is poised to decline at open on Wednesday after military action by India against Pakistan heightened cross-border tensions.

These developments unfold as the U.S. Federal Reserve begins its two-day policy meeting, with Chair Powell expected to maintain rates while signalling more data is needed before deciding future moves.

Meanwhile, Malaysia's central bank is expected to keep interest rates unchanged at its meeting on Thursday.

Thai baht THB=TH slipped 0.6%, while the Malaysian ringgit MYR= traded flat.

HIGHLIGHTS:

China, U.S. to hold ice-breaker trade talks in Geneva on Saturday

Indonesia central bank seeks balance between growth and price stability