EMERGING MARKETS-Asian FX and stocks gain as fears of rapid Fed hikes ease

* Stocks in Thailand lead peers, set for best day since 2020 * Peso among best-performing currencies so far this year * China Jan-Feb retail sales swing back to growth By Navya Mittal March 15 (Reuters) - Southeast Asian currencies and stocks rose on Wednesday, with the Philippine peso leading gains, after largely in-line U.S. inflation data reinforced hopes of less aggressive rate hikes, while China retail sales swung back to growth. The Philippine peso and the Malaysian ringgit firmed 0.3% each, with the latter on track for its fifth straight day of gains, while the Indonesian rupiah was trading marginally higher. U.S. consumer price inflation cooled slightly in February, largely in line with market expectations. However, sticky rent prices meant inflation remained elevated, posing a dilemma for the Federal Reserve to either push ahead with rate hikes or announce a pause. Interest rate futures pricing implied an 80% chance of a 25-basis point (bps) Fed rate hike, a lot more dovish than a week ago when markets priced a similar chance of a 50-bps hike. "Fed Chair Jerome Powell faces an ever more challenging task at hand, as he now has to balance dealing with inflation that still runs too hot and risks related to financial stability," analyst at Maybank said in a note. The Philippine peso, which trumped the rupiah to be the best-performing currency among its peers so far this year, was supported by the outlook on rates. The country's central bank in February said it could raise interest rates by a quarter of a percentage point one more time this year. "The Bangko Sentral ng Pilipinas (BSP) will probably be the last central bank to hike as Philippine inflation hit more than 8% in January" said Nicholas Mapa, Senior Economist, Philippines at ING. "Several other central banks in the region have managed to pause and with the Fed likely taking on a less aggressive stance, the peso will be the likely beneficiary of widening interest rate differentials," he added. Stocks in the region traded higher on the back of tapering rate hikes expectations and economic data showing signs of improvement in China, the region's top trading partner. Shares in Thailand soared as much as 2.7%, set to post their sharpest gains in over two years, while benchmark indexes in Manila, Seoul, and Singapore gained over 1% each. Equities in China advanced 0.5% as the country's retail sales swung back to growth and factory activity expanded for the first two months of this year. It also forecast achieving its annual inflation target of 3% despite some pressures. Meanwhile, benchmark bond yields in Indonesia fell by 3 bps to 6.761%. The country's finance minister said bond issuance would be front-loaded this year, predicting that global interest rates would continue to rise and stay high in the second half of 2023. "We see front-loading strategy as positive for the budget, while it will put pressure on yield in the near term," said Fakhrul Fulvian, economist at Trimegah Securities. Highlights ** China says employment basically stable - stats bureau ** Older workers pull South Korea jobless rate down to record low ** Indonesia Feb trade surplus at $5.48 bln, beats forecast Asia stock indexes and currencies at 0551 GMT COUNTRY FX RIC FX FX INDE STOCKS STOCKS DAILY % YTD % X DAILY YTD % % Japan -0.27 -2.59 <.N2 -0.27 5.58 25> China EC> India +0.02 +0.30 <.NS 0.34 -5.54 EI> Indonesi +0.07 +1.27 <.JK 0.01 -3.04 a SE> Malaysia +0.25 -1.59 <.KL 0.78 -6.07 SE> Philippi +0.28 +1.43 <.PS 1.01 -1.65 nes I> S.Korea 11> Singapor +0.20 -0.18 <.ST 1.14 -2.65 e I> Taiwan +0.11 +0.40 <.TW 0.27 8.94 II> Thailand +0.14 +0.26 <.SE 2.49 -6.40 TI> (Reporting by Navya Mittal in Bengaluru; Editing by Simon Cameron-Moore and Janane Venkatraman)