* MSCI EM stocks slip 1.4%, FX up 0.3%

* KOSPI heading for worst month on record

* Fed rate decision later in the day

By Utkarsh Hathi

July 29 (Reuters) - Emerging market stocks held near a

three-month low on Wednesday as a tech selloff in Asia deepened,

while most currencies were flat to higher against a steady

dollar ahead of the Federal Reserve's policy decision.

Chipmakers in Asia extended losses after a brutal selloff in

the previous session as anxiety over lofty AI valuations and

return on massive capex spending unsettled investors ahead of

crucial U.S. big tech earnings.

South Korea's KOSPI plunged 6%, led by SK Hynix ( SKHY )

, which dropped 9.6% after its quarterly results

failed to meet market expectations.

The benchmark is heading for its worst month on record,

bearing the brunt of leveraged bets by retail investors on

semiconductor stocks.

"The scale of leverage built up means the flush out will not

complete within one or two weeks, and the price correction

itself is generating more negative headlines, creating a

self-reinforcing cycle that continues to overshadow any

positives," said Peter Kim, senior managing director at KB

Securities.

South Korea's finance minister apologised in parliament on

Wednesday for introducing single-stock leveraged exchange-traded

funds, and added that the government is reviewing ways to

stabilise the stock market.

The tech-heavy Taiwanese benchmark slipped 3.8%, and

Chinese equities rose 0.7%.

MSCI's global EM stocks index fell 1.4%, while the

currencies gauge was up 0.3%.

Most equities in Central and Eastern Europe gained, with

Polish and Hungarian benchmarks up 0.6% and 0.7%,

respectively. Energy-laden Romanian stocks were flat,

and are outperforming regional peers on higher oil prices.

Oil rose 3% after dropping more than 15% in the previous

three sessions as U.S. and Saudi Arabia conducted joint strikes

on Iran-backed groups in Iraq, while Iran ruled out Oman's

proposal for regional joint management of the Strait of Hormuz.

Renewed escalation in the Middle East had increased investor

expectations of hawkish signals from the Federal Reserve, with

the central bank expected to hold rates later in the day.

Analysts at JPMorgan said they expect at least two hawkish

dissents, citing the impatience of some committee members with

persistent above-target inflation.

Most Asian currencies were rangebound against the dollar.

South Africa's rand edged 0.2% lower, while its

stocks gained 0.8%, tracking precious metal prices.

In emerging Europe, currencies traded lower against the

euro, with Hungary's forint slipping the most, 1%, its

biggest single-day drop in more than a month.

The Turkish lira was muted against the dollar.

HIGHLIGHTS:

** China sets overnight reverse repo rate steady at 1.25%,

sources say

** Bank Indonesia committed to strengthening efforts to

stabilise rupiah

** Saudi stock gauge leads Gulf losses on rising regional

tensions

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