EMERGING MARKETS-Most Asian FX, equities falter as Fed officials flag rate-cut caution

(.) * Philippine peso drops to over 1-1/2-year low * U.S. Fed meeting minutes awaited * Indonesia, S.Korea rate decision in focus By John Biju May 21 (Reuters) - Most emerging Asian currencies and equities retreated on Tuesday as recent comments from U.S. Federal Reserve officials dented hopes on timing of potential interest rate cuts this year ahead of the minutes of the central bank's latest policy meeting. The Philippine peso declined as much as 0.7% to 58.250 per U.S. dollar, its lowest since November 2022. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.9%, a day after it rose to its highest level in more than two years after China unveiled substantial measures to support its property sector last week. Equities in China declined 0.7% while stocks in Malaysia retreated 0.2%, a day after it hit a more than three-year high. Several Fed officials on Monday signalled continued caution on rate policy and inflation despite data last week showing easing consumer prices in April, putting a dent in risk sentiment towards Asian currencies and equities. "Fed officials keeping a cautious tone is understandable, as the inflation outlook is highly uncertain," said Frances Cheung, a rates strategist at OCBC. They may need to see a couple of months of easing in inflation to feel confident enough to start cutting rates, Cheung added. "As long as the risk of the Fed pivoting back to tightening is seen as low, the external environment shall be favourable for Asian assets in general." Markets currently factor in about 41 basis points of Fed rate reductions this year, with a quarter-point cut fully priced in for November. Focus will be on the minutes of the Fed's last policy meeting due on Wednesday to gauge the timing and extent of possible interest rate cuts this year. Investors will also keep an eye on the interest rate decision by the Indonesian central bank on Wednesday, after Bank Indonesia delivered a surprise rate hike in its last policy meeting to stabilise the rupiah. The Indonesian rupiah crossed the psychologically important 16,000 per U.S. dollar level and was last down 0.3% at 16,022.00. A Reuters poll showed that the Bank Indonesia will likely keep its key interest rate on hold through the next quarter to support a weak rupiah. The South Korean won declined 0.5% while stocks fell 0.7% ahead of a rate decision from the Bank of Korea later this week where expectations are for the central bank to keep the policy rate unchanged. The Thai baht fell 0.6% and equities declined 0.6%. The country's finance minister said Thailand needs more stimulus measures to help the economy meet its potential after growth was lower than expected in the first quarter. HIGHLIGHTS: ** Japan closely monitoring weak yen and bond market, finmin says ** Philippine cbank will intervene in forex market if volatile, governor says ** Thai cabinet approves plan to increase 2024 budget, official says Asia stock indexes and currenc ies at 0638 GMT COUNTRY FX RIC FX FX INDE STOCK STOCK DAILY YTD % X S S YTD % DAILY % % Japan +0.03 -9.69 <.N2 -0.31 16.38 25> China EC> India -0.02 -0.17 <.NS 0.10 3.65 EI> Indones -0.34 -3.93 <.JK -0.53 -0.62 ia SE> Malaysi -0.15 -2.13 <.KL -0.19 11.67 a SE> Philipp -0.57 -4.80 <.PS -0.98 2.60 ines I> S.Korea 11> Singapo -0.02 -2.11 <.ST -0.47 1.79 re I> Taiwan -0.26 -4.91 <.TW -0.16 18.44 II> Thailan -0.63 -5.93 <.SE -0.55 -3.16 d TI> (Reporting by John Biju in Bengaluru; Editing by Christian Schmollinger and Rashmi Aich)