EMERGING MARKETS-Surprise hefty rate hike caps Indonesian rupiah losses; Asia FX weakens

* BI hikes interest rate by 50 bps * BSP raises interest rate by 50 bps * BOJ keeps ultra-low rates, yen weakens further * Philippine peso hits record low By Riya Sharma Sept 22 (Reuters) - The Indonesian rupiah pared most of its earlier losses on Thursday after its central bank delivered a larger-than-expected interest rate hike, while other Asian currencies retreated after the U.S. Federal Reserve gave a hawkish monetary policy outlook. Equities in Asia also hit a two-year low after the Fed delivered its third straight 75 basis point rate hike on Wednesday and signalled further increases, underscoring its resolve to not let up its fight to contain inflation. Bank Indonesia (BI) raised its key interest rate by 50 bps, higher than the expectations of 25 bp hike, after unexpectedly hiking its policy rate in August for the first time since 2018, embarking on monetary tightening to fight rising inflation. "BI raised rates by 50 bps when markets were expecting a 25 bps raise. This second surprise in a row from BI was mainly on account of a rather hawkish pivot by Fed yesterday, and more rate hikes are expected by BI over the next few meetings," Societe Generale economist Kunal Kundu said. The rupiah was down 0.2%, after touching a more than two-year low, while shares in Jakarta were largely unchanged, up 0.3%. The Philippine central bank also raised its benchmark interest rates by half a percentage point, as expected, in its fifth hike this year to curb inflation and support a sagging local currency. The peso remained largely unchanged at a record low, down 0.9%, while equities in Manila were down 0.6%. The Bank of Japan remained a global outlier among central banks, as it maintained ultra-low interest rates and dovish policy guidance. The yen, down more than 20% so far this year against the greenback, was down 0.9% at its lowest level in 24 years. Fed officials signalled that borrowing costs would keep rising this year and projected rates hitting 4.4% this year, higher than markets had priced in before the meeting and 100 bps more than the central bank projected three months ago. The U.S. dollar hit a two-decade high versus its major peers. "The 2Y yield already running ahead of the Fed funds rate, and some safe-haven flows amid geopolitics might have been factors preventing the yield from reacting more to the FOMC outcome earlier," Frances Cheung, rates strategist at OCBC Bank, said in a note. Higher yields strengthen the dollar, boosting the appeal of Treasury notes and the greenback, and in turn weigh on riskier Asian assets. "More aggressive rate hikes will further hurt growth while keeping inflation expectation anchored; such inflation-growth matrix shall limit the upside to the 10Y yield at least in the near term," Cheung said. Investors in Asia are also awaiting a policy decision from the central bank in Taiwan later in the day, with a mild interest rate hike expected, according to economists polled by Reuters. The Taiwan dollar was down 0.6% at its lowest in three years, while shares on the Taiwan Stock Exchange declined 0.6%. HIGHLIGHTS: ** Indonesian 10-year benchmark yields up 3.300 basis points at 7.228%​​ ** Singapore's 10-year benchmark yield is up 0.4 basis points at 3.194% Asia stock indexes and currencies at 0758 GMT COUNTRY FX RIC FX FX INDE STOCK STOCK DAILY YTD % X S S YTD % DAILY % % Japan -1.18 -21.0 <.N2 -0.54 -5.64 5 25> China 0 EC> 9 India -0.94 -7.94 <.NS -0.63 1.45 EI> Indones -0.13 -5.09 <.JK 0.32 9.57 ia SE> Malaysi -0.40 -8.85 <.KL -0.59 -8.22 a SE> Philipp -0.84 -12.8 <.PS -0.63 -11.5 ines 2 I> 3 S.Korea 7 11> 7 Singapo -0.25 -5.03 <.ST -0.29 4.12 re I> Taiwan -0.56 -12.4 <.TW -0.97 -21.5 2 II> 9 Thailan -0.75 -10.8 <.SE 0.57 -0.89 d 3 TI> (Reporting by Riya Sharma in Bengaluru; Editing by Rashmi Aich)