*

Malaysia central bank holds rates steady, ringgit down

*

Chinese military, defense stocks rise on India-Pakistan

conflict

*

Markets await key Taiwan, China trade data

(Updates for Afternoon trade)

By Roushni Nair

May 8 (Reuters) - The Malaysian ringgit held on to

losses on Thursday after the country's central bank kept

interest rates steady in a widely expected move, while its

regional peers declined marginally on renewed strength in the

U.S. dollar.

The ringgit was down 1% at 4.280 per U.S. dollar,

falling for a third straight session. The Philippine peso

and Singapore dollar each extended losses, retreating

0.2%.

"Malaysia's current account surplus is under threat from

downsides to exports and tourism, at the same time, there are

slight opportunities for trade diversion and investments away

from the U.S.-China trade corridor to Malaysia," said Jeff Ng,

head of Asia macro strategy at Sumitomo Mitsui Banking Corp.

Ng remains optimistic about the ringgit's prospects,

forecasting USD/MYR to strengthen to 4.20 by end-June and

appreciate to 4.10 by year-end.

Bank Negara Malaysia's approach stands in contrast with

central banks in Indonesia, Korea, Thailand and the Philippines,

which have already eased rates more than once to stimulate their

economies.

The dollar index, which measures the currency against

six major counterparts, rose 0.3% to its highest level in a

week.

As expected, the U.S. Federal Reserve maintained rates on

Wednesday, but Chair Jerome Powell cautioned that economic

growth remained uncertain due to persistent trade tensions and

inflation risks.

Asian equities retreated broadly, though declines were

tempered by Beijing's stimulus plans and upcoming senior-level

trade discussions between Washington and Beijing slated for the

weekend.

Stocks in Jakarta and Manila fell 0.9% and

1.2%, respectively. Shares in Bangkok slipped 0.8%,

while those in South Korea rose 0.2%.

Asian currencies have seen dramatic volatility in recent

days, with the Taiwan dollar posting a historic 6%

two-day surge against the greenback before steadying in the last

two sessions. The unit was flat on the day.

Taiwan's dollar-heavy, unhedged market saw a sudden capital

influx, which triggered a record two-day rally on Friday.

With the surge coinciding with the end of U.S.-Taiwan

trade talks, investors speculated on the possibility of an

agreement to weaken the greenback in return for trade

concessions - a notion that has been vigorously denied by

Taiwan's central bank and president.

The Indian rupee reversed earlier gains to fall

0.4%, a day after India's missile strikes on Pakistan and

Pakistan-administered Kashmir on Wednesday.

Shares in India were flat, while Pakistan's

benchmark index plunged 6.3% before authorities halted

trading, according to traders.

Chinese military and defense stocks

surged amid escalating India-Pakistan

tensions

, with investors betting on increased defense spending in

the region.

The Indian rupee India conducted missile

strikes on Pakistan and Pakistan-administered Kashmir.

HIGHLIGHTS:

** Philippines Q1 GDP grows 5.4% y/y, below expectations

** South Korea to monitor financial, forex markets

Asian

stocks

and

currenc

ies as

of 0831

GMT

Japan -0.61 +8.6 0.41 -6.05

China 7 EC>

India -0.52 +0.4 Indones +0.24 -2.4 Malaysi -0.82 +4.6 Philipp -0.31 +4.4 S.Korea 1 11>

Singapo -0.13 +5.3 Taiwan -0.03 +8.1 2

Thailan +0.05 +4.4 7