EMERGING MARKETS-Asian stocks rise, currencies strengthen on Fed rate cut hopes

By Roushni Nair

Aug 28 (Reuters) - Most Asian stocks inched higher and currencies regained some lost ground on Thursday, buoyed by a weakening U.S. dollar, as mounting expectations for a Federal Reserve rate cut next month prompted investors to rotate back into riskier regional assets.

The South Korean won KRW=KFTC led the currency rally, climbing 0.4% to 1,388 per U.S. dollar after the Bank of Korea held rates steady in a widely anticipated decision. Seoul's Kospi index .KS11 mirrored the currency strength, advancing 0.5%.

Elsewhere, the Thai baht THB=TH and Taiwan dollar TWD=TP each firmed 0.2%, while the Indonesian rupiah IDR=, Philippine peso PHP=, and Malaysian ringgit MYR= traded largely flat.

Equity markets showed broader momentum, with Jakarta's main index .JKSE and Kuala Lumpur's benchmark .KLSE each posting 0.4% gains. Shanghai's composite index .SSEC outpaced regional peers with a 0.6% advance.

In the Philippines, the peso PHP= held steady while the benchmark PSE index .PSI slipped 0.5% as investors positioned ahead of an anticipated 25-basis-point rate cut by Bangko Sentral ng Pilipinas later in the day.

BNP Paribas EM Asia FX strategist Parisha Saimbi sees "scope for some Asian central banks to conduct further monetary easing, particularly in Indonesia and the Philippines, where sluggish economic growth could use further support."

Room for another rate cut in Malaysia could open up if U.S. growth slows sharply and leads to further Fed rate cuts, Saimbi added.

Traders amplified bets for a Fed rate cut next month after New York Fed President John Williams signaled a reduction was possible. The U.S. dollar index =USD fell marginally, by 0.1%, in its third straight session of losses.

This week, the dollar has faced additional pressure from President Donald Trump's intensified campaign to influence monetary policy, including his attempt to remove Fed Governor Lisa Cook and install a loyalist. USD/

Traders currently lay around 84% odds of a quarter-point rate cut next month, and have priced in a cumulative 56 basis points of easing by year-end.

The political pressure on Fed independence has particular implications for Asian markets.

Saimbi said "currencies that would be more sensitive to concerns of Fed independence would be those that hold larger unhedged US asset exposure," specifically China, South Korea, Taiwan, and Singapore in the Asian context.

Separately, Asia-Pacific shares outside Japan .MIAPJ0000PUS fluctuated before closing 0.2% lower as concerns over Nvidia's NVDA.O China outlook offset the AI giant's strong earnings, pulling U.S. equity futures down in after-hours trading.

HIGHLIGHTS:

** Philippine central bank sets new time for interest rate announcements

** China trade negotiator: ready to manage differences with Canada