Asian stocks gain on Fed rate-cut bets, SE Asia political situation in focus

• Indonesian stocks surge 1% as protests ease, rupiah up
• South Korea shares rise on weak inflation, won steady
• Thailand's baht largely flat, Bangkok shares up 0.3%

By Roushni Nair

Sept 2 (Reuters) - Most Asian stock markets rose on Tuesday, led by Indonesia and South Korea on growing bets of a U.S. interest rate cut this month, while investors assessed political risks in Southeast Asia's two largest economies.

Stocks in Indonesia, Southeast Asia's biggest economy, rose more than 1% in their biggest intraday percentage gain in three weeks, climbing for the first time since thousands of demonstrators clashed with police outside the House of Representatives late last week.

The benchmark index .JKSE had lost 1.6% by Monday's close since widespread protests against controversial election law changes began a week ago.

Bank Indonesia's interventions in the currency market helped the Jakarta Composite cut its losses, according to Philip Wee, a senior FX strategist at DBS. The rupiah IDR= traded almost flat on Tuesday, last down 0.06%

"Still, investors are looking beyond rhetoric for policy credibility and reform momentum to anchor long-term capital," he said.

South Korean shares .KS11 rose 0.8% after data showed that consumer inflation slowed in August, coming in well below analysts' expectations. The won KRW=KFTC traded largely flat.

In Thailand, the region's second-biggest economy, the baht THB=TH traded largely flat, last up 0.09%, and equities .SETI advanced 0.3%.

Thailand's political crisis deepened after the Constitutional Court dismissed Prime Minister Paetongtarn Shinawatra on Friday for ethics violations.

The Thai Constitutional Court's decision may have brought relief and closure, Wee said.

"This year, the THB has been less vulnerable to political premium pricing, cushioned by a persistent current account surplus, record foreign reserves, and broad-based USD weakness tied to Fed rate-cut expectations," he said.

Singapore equities .STI rose 0.4%, while shares in Kuala Lumpur .KLSE and Manila .PSI both fell 0.4%.

Among currencies, the Philippine peso PHP= led losses, while the Singapore dollar SGD=, Malaysian ringgit MYR=, and Indian rupee INR=IN traded largely flat.

The dollar index =USD snapped a five-session losing streak to edge up 0.2%, with investors bracing for a crucial three-week gauntlet of employment figures, inflation readings and the Federal Reserve's interest rate decision. USD/

Markets price in an 89% chance of a 25-basis-point rate cut, but this week's data will help gauge whether the Fed could lean towards a jumbo cut.

In Malaysia, the central bank is widely expected to hold rates steady at 2.75% on Thursday and keep them there until at least 2027, according to a Reuters poll.

Locally, investors await key inflation data from Malaysia, Taiwan, Vietnam, Thailand and the Philippines later this week. Japan PM to ask ministers to compile economic package