EMERGING MARKETS-Indonesia stocks pare gains, rupiah edges up as central bank holds rates

By Shivangi Lahiri

March 17 (Reuters) - Indonesian stocks pared some gains while the rupiah edged higher on Tuesday after the country's central bank kept its key policy rates unchanged amid uncertainty over the impact of the Middle East war.

Stocks in Jakarta .JKSE were last up 1.2% after rising as much as 1.8% earlier in the day, while the rupiah IDR= firmed to 16,975 per dollar, having touched an all-time low of 16,995 a day earlier.

Bank Indonesia (BI), in a widely expected decision, held the benchmark 7-day reverse repurchase rate at 4.75%, and said it will issue a new policy on foreign currency transactions applicable from April to support the currency.

Governor Perry Warjiyo said the central bank had intensified its rupiah intervention as the Iran war had affected the currency, adding that the BI has "erased the statement on a potential rate cut due to the Middle East conflict".

"A period of high oil and gas prices would cause the current account deficit to widen, a risk acknowledged by Governor Warjiyo, and threaten further downward pressure on the rupiah," analysts at Capital Economics wrote.

"The fiscal backdrop compounds this vulnerability."

Elsewhere in Asia, stocks in Seoul .KS11 trimmed some gains but still closed at a two-week high, up 1.6%, helped by a near 3% jump in Samsung Electronics 005930.KS shares.

Nvidia NVDA.O CEO Jensen Huang said its new AI chips were being made by Samsung, prompting analysts to predict that the South Korean firm's loss-making foundry business could return to profit as early as next year.

Taiwan's tech-heavy stock market .TWII, which will also benefit from rising AI chip demand, ended 1.5% higher.

That helped the MSCI EM Asia index .MIMS00000PUS advance about 1.1%.

Markets are awaiting policy decisions later this week from the U.S. Federal Reserve, the Bank of Japan and other major G10 central banks. The Reserve Bank of Australia raised rates on Tuesday for a second straight month to curb inflation.

Thailand stocks .SETI rose as much as 2.5% to their highest since March 2, while stocks in Malaysia .KLSE advanced 0.8%.

Currencies in emerging Asia were largely muted, with the Malaysian ringgit MYR= gaining as much as 0.3% to hit its highest level in two weeks.

By contrast, Thailand's baht THB=TH slipped to 32.39 against the dollar, while the Philippine peso PHP= hovered close to the key psychological level of 60 per dollar.

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