EMERGING MARKETS-Asia stocks, currencies mixed as dollar stabilises; Fed easing bets build

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By Roushni Nair

May 14 (Reuters) – Asian markets traded mixed on Wednesday as the U.S. dollar steadied after posting its steepest one-day decline in nearly a month, with traders weighing a softer U.S. inflation print that raised bets on monetary easing by the Federal Reserve.

Taiwan stocks .TWII rose as much as 1.74% to their highest since March 28, while shares in Indonesia .JKSE advanced 1.78% to their best session in over a month, reacting late to the U.S.-China trade breakthrough during the weekend. Indonesia was closed on Monday and Tuesday for a national holiday.

On the other hand, equities in Thailand .SETI, Singapore .STI and Malaysia .KLSE were down more than 0.2%, each.

“There will be a close watch on how countries such as Japan, South Korea, Taiwan and Thailand fare in trade negotiations, as any successful deal on their part could be a boon for their respective currencies if capital inflows increase,” said Tim Waterer, a market analyst at KCM Trade.

The weekend agreement in Geneva exceeded market expectations, with the U.S. dropping extra tariffs imposed on China this year to 30% from 145%, while China cut its retaliatory measures to 10% from 125%.

Markets are betting on two Fed rate cuts by this year-end — including a September quarter-point reduction — as tepid U.S. inflation data strengthened the easing argument through smoothening global trade frictions.

The U.S. dollar index =USD, which measures the currency against six major counterparts, traded flat at 100.87 following its biggest decline in more than three weeks overnight. USD/

The Taiwan dollar TWD=TP strengthened 0.6% in its best session in over a week, rebounding from a six-day slide as foreign investors poured funds into local equities despite early central bank intervention, according to UBS analysts.

Last week’s 6% two-day surge in the Taiwan dollar – its largest on record – came amid speculation about currency appreciation commitments in potential U.S. trade talks, though Taiwan’s central bank and president firmly denied such arrangements.

The Indonesian rupiah IDR= and Thai baht THB=TH both weakened 0.3%, while the Indian rupee INR=IN and Malaysian ringgit MYR= each gained 0.2%.

The rupiah is weathering capital flight as rising U.S. yields lure investors away, while heightened concerns about Indonesia’s fiscal position — relative to regional peers — have dampened economic confidence, Waterer said.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up more than 1% in early trade after U.S. stocks climbed back into the positive territory for the year, erasing losses triggered by Trump’s chaotic rollout of sweeping tariffs. MKTS/GLOB

HIGHLIGHTS:

** Malaysia’s economy likely lost momentum in first quarter

** Thai central bank says policy accommodative, no deflation

(Reporting by Roushni Nair in Bengaluru; Editing by Rashmi Aich)

((Roushni.Nair@thomsonreuters.com))