* Taiwan, S.Korea stocks hit record levels * TSMC's earnings report due later in the day * Asian currencies rise, Indian rupee up 0.3% By Himanshi Akhand Oct 16 (Reuters) – Stock markets in Taiwan and South Korea reached all-time highs on Thursday, while currencies in emerging Asia rose as U.S.-China trade worries and expectations of interest rate cuts by the U.S. Federal Reserve weighed on the dollar. South Korea's KOSPI rose 2% to a record high, after the country's chief presidential policy adviser said he was "optimistic" about ongoing talks to finalise a trade deal with the U.S. Taiwan shares climbed 1.4% ahead of chip giant TSMC's earnings report later in the day. The index has risen nearly 20% this year on the back of AI-fuelled optimism. Other Asian stock markets also rose in line with Wall Street's strong finish overnight. Shares in Manila, Bangkok and Jakarta gained 0.3% to 0.9%. Currencies in the region were broadly higher with the Thai baht and the South Korean won rising 0.2% each. The U.S. dollar index, which measures the greenback against six other currencies, was down 0.2% as continuing trade friction between the U.S. and China dampened sentiment. U.S. Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent on Wednesday blasted China's expansion of rare earth export controls as a threat to global supply chain. China's commerce ministry defended the controls and called U.S. criticism hypocritical citing U.S. steps against Chinese goods. Amid the friction, however, U.S. President Donald Trump still expected to meet Chinese President Xi Jinping in South Korea this month, Bessent said, raising the possibility of an extended truce in tit-for-tat tariffs. "There are risks that the U.S. and China could decouple further but, Greer/Bessent's repeated rhetoric on how the Trump-Xi meeting will go on, mention of an extension of the trade truce suggest that the Trump team is unwilling to escalate tensions even further. That suggests a potential backstop for a complete fall-out in the near-term," Maybank analysts said in a client note. Investors' increasing confidence in the Fed to cut rates at its next two policy meetings also weighed on the greenback. Maybank analysts expect the dollar to remain subdued in the near term as political shifts impact the yen and euro and regional central banks intervene to prop up local currencies. China's yuan firmed to a two-week high after the central bank set its strongest daily midpoint in a year. The Indian rupee rose 0.3% to 87.78 a dollar, extending Wednesday's 0.8% gain. The Reserve Bank of India's heavy dollar sales through state-run banks on Wednesday had lifted the rupee and was widely read as a signal of the central bank's discomfort with constant pressure on the currency. Meanwhile, Trump's comment about Indian Prime Minister Narendra Modi pledging to stop buying oil from Russia also aided the sentiment towards the rupee. HIGHLIGHTS: ** Flare-up in US-China trade tensions poses a big risk to Thailand's growth, deputy central bank governor says ** Milei says Argentina, US in talks over trade deal ** Some Indian refiners prepare to cut Russian oil imports, sources say Asia stock indexes and currencies at 0416 GMT COUNTRY FX RIC FX FX INDEX STOCKS STOCKS DAILY % YTD % DAILY % YTD % Japan +0.08 +4.15 1.00 20.69 China +0.03 +2.44 0.10 16.84 India +0.34 -2.46 0.42 7.55 Indonesia -0.04 -2.88 0.94 14.79 Malaysia +0.09 +5.75 0.18 -1.70 Philippines -0.02 -0.05 0.28 -6.39 S.Korea +0.20 +3.70 2.00 55.46 Singapore +0.12 +5.49 -0.46 14.80 Taiwan +0.09 +7.03 1.15 19.77 Thailand +0.06 +5.54 0.30 -7.83 (Reporting by Himanshi Akhand in Bengaluru; Editing by Christopher Cushing)
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