EMERGING MARKETS-Asian equity rally pauses ahead of Fed rate cut, policy outlook

By Sameer Manekar

Sept 17 (Reuters) - A record rally in most emerging Asia equities came to a halt on Wednesday as investors globally awaited a widely anticipated rate cut by the U.S. Federal Reserve and its fine print to assess the scope for additional policy easing.

Equity benchmarks in Taiwan .TWII and South Korea .KS11 slipped from their record levels scaled in the previous session, with the latter falling more than 1% to snap an 11-session winning streak, the index's longest in six years.

The MSCI gauge of EM Asia stocks .MIMS00000PUS was up 0.6%, as of 0417 GMT, climbing for the ninth consecutive session to scale a four-year peak, though downbeat performances in Taiwan and South Korea limited the upside. A similar index tracking ASEAN equities .MISU00000PUS had barely moved by noon in Singapore.

Stocks globally have been buoyant over the past few sessions as investors rush into risk assets on hopes that an imminent Fed rate cut this week and signals of further easing will boost the economy and ease worries over a weakening labour market.

Lower U.S. interest rates are a drag on the dollar, which enhances the appeal for emerging market assets for their higher yield and potential currency appreciation.

"Markets widely expect the Fed to cut rates by 25 basis points, but the key focus is likely on its forward guidance, specifically whether the dot plot signals a faster pace of cuts through the rest of 2025 and into 2026," said Lloyd Chan, a senior currency analyst with MUFG.

Traders have fully priced in a quarter-point Fed rate cut later in the day, with futures factoring in 67.9 bps of cuts by the end of the year. 0#USDIRPR

In Southeast Asia, Indonesia's markets .JKSE drifted in a tight range, while its rupiah IDR= was a touch higher at 16,420 a dollar.

Bank Indonesia is widely expected to keep its key interest rate unchanged later in the day, primarily to stabilise a currency that has weakened 2% over the past month on pressures from back-to-back rate cuts and the abrupt exit of a reputed finance minister that sparked concerns over fiscal prudence.

"We view BI's pause as temporary, as policymakers take stock of recent rupiah volatility in the wake of protests and cabinet reshuffle, transmission of rate cuts undertaken this year, and firm food inflation in the near-term," DBS analysts, led by senior economist Radhika Rao, wrote in a client note.

Thailand's equity index .SETI edged lower and, if the trend continues, would snap an eight-session winning streak that followed the election of a new prime minister, with investors eyeing the durability of political stability.

"Political stability (in Thailand) is improving, and the recent cabinet formation alongside discussions on reviving consumption subsidies and expanding fiscal support offers reassurance," said Kenneth Tang, a senior portfolio manager at Amova Asset Management.

"However, sustained improvement in investor confidence will require more concrete evidence of effective policy execution."

Elsewhere, Singapore's FTSE Straits Times index .STI fell for a fourth consecutive day, though it remained about 50 pips shy of its lifetime high scaled last Friday. The Singaporean dollar SGD= also slipped off an eight-week high touched in the previous session.

Stocks in Malaysia .KLSE were barely changed after a two-day break, while the ringgit MYR= hovered around a five-week high of 4.1890 a dollar.

HIGHLIGHTS:
** Yields on Indonesia's 10-year government bonds ID10YT=RR at 6.339%
** Thai baht THB=TH up 8% YTD; c.bank eyeing gold trading tax to curb strength
** Vietnam 'pretty confident' of FTSE Russell stock market upgrade next month