EMERGING MARKETS-Asian currencies retreat after bonds rally; US fiscal, trade concerns persist

By Himanshi Akhand

May 27 (Reuters) - Asian currencies reversed course to trade lower on Tuesday as a rally in global bonds whipsawed markets that remained concerned about U.S. fiscal health and President Donald Trump's erratic trade policies.

The Malaysian ringgit MYR= fell 0.3% against a stronger dollaer after reaching a three-week high earlier in the session.

The Singaporean dollar SGD=, Indonesian rupiah IDR=, and the Indian rupee INR=IN weakened between 0.2% and 0.4%.

U.S. Treasury yields slumped after 30-year bonds mimicked a steep price rally in longer-term Japanese debt and as investors mulled the latest developments in U.S. tariff policy. US/

Trump's policy reversals and his sweeping spending and tax-cut bill have turned investors off U.S. assets.

In the latest example, two days after threatening to slap 50% tariffs on imports from the European Union next month, Trump restored a July 9 deadline for talks.

"There are three major things driving not just Asia but global markets at the moment: concerns about U.S. debt and deficits, trade deals and the diversification away from the dollar," said Michael Wan, a senior currency analyst at MUFG.

"The big picture is that U.S. assets are reasonably over-valued, and there has been a build-up of these assets over time which could impact the general flow of assets moving forward."

Asian currencies have benefited from broader weakness in the greenback this month, with the dollar index =USD heading for a fifth straight month of declines against a basket of currencies, which would mark the longest such losing streak since 2017. FRX/

Taiwan's dollar TWD=TP is on course to log its best monthly performance on record, buoyed by a historic 6% spike over two days in early May. It was last trading flat at 29.939 per dollar.

The South Korean won KRW=KFTC, which has gained more than 4% so far this month, was last down 0.2%. The Thai baht THB=TH weakened 0.4%.

Thailand's commerce ministry has warned that exports in the second half will face a risk of U.S. tariffs after a moratorium expires in July. Meanwhile, the country's finance minister said the tariffs could see the economy stumble, with growth potentially falling to just over 1% this year.

Equities in Bangkok .SETI fell as much as 1.6% to a near one-month low.

Other regional stock markets were also weaker with shares in Kuala Lumpur .KLSE, Taipei .TWII and Seoul .KS11 falling between 0.3% and 0.9%.

HIGHLIGHTS:

Thailand's foreign tourist arrivals so far this year fall 2.55% y/y

China's industrial profits maintain growth momentum in April despite trade tensions

Asian hedge funds regain lost ground in May, increasing leverage