SINGAPORE, July 18 (Reuters) - Asian equities fell on

Thursday, led by chip stocks as investors fret over the prospect

of escalating trade tensions between the U.S. and China, while

the yen surged to a six-week high in the wake of suspected

interventions by Tokyo last week.

The U.S. dollar loitered near its weakest in four

months against a basket of currencies as comments from Federal

Reserve officials bolstered the case for a cut in September,

keeping gold prices near record highs.

MSCI's broadest index of Asia-Pacific shares outside Japan

fell 0.57%, with tech heavy South Korean shares

down nearly 1%. The yen's strength and a sharp drop in

chip stocks took Japan's Nikkei down 2%.

China stocks also slipped as investors awaited policy news

from a key leadership gathering in Beijing. The Shanghai

Composite index was down 0.4% and blue-chip CSI300 index

off 0.5%.

A report that the United States was considering tighter

curbs on exports of advanced semiconductor technology to China

sent chip stocks and the Nasdaq tumbling overnight, led

by AI darling Nvidia ( NVDA ) and Apple ( AAPL ).

Investor nerves were also jangled after Republican

presidential candidate Donald Trump said Taiwan "did take about

100% of our chip business" and should pay the U.S. for its

defence as it does not give the country anything.

The comments sent shares of Taiwan Semiconductor

Manufacturing Co ( TSM ) sharply lower on Wednesday ahead of

its second quarter earnings later on Thursday. TSMC shares

slumped 3% in early trading, with the broader index down

nearly 2%.

"We're seeing quite a few divergences across key markets,

most of which can be tied back to U.S. politics one way or

another," said Matt Simpson, senior market analyst at City

Index.

"And this could just be the beginning of broken correlations

making a comeback as markets figure out who will do what in the

U.S. political landscape."

Investors are fully pricing in a 25 basis point rate cut in

September after Federal Reserve officials said on Wednesday the

U.S. central bank was "closer" to cutting interest rates, citing

the progress in inflation easing close to its 2% target.

That has left the dollar struggling, with the euro

steady at $1.09385 near the four-month high it touched on

Wednesday. Sterling was last at $1.30065, close to a

one-year peak touched in the previous session.

Investor attention will be on the policy decision from the

European Central Bank later in the day, where the central bank

is expected to stand pat, although comments from officials will

be crucial in gauging when the next rate cut will come.

The dollar index, which measures the U.S. currency

versus six peers, was last at 103.69, just above the four-month

low of 103.64 it touched on Wednesday.

"Looking beyond the next few weeks means seeing that falling

U.S. inflation expectations will reach its limits by late 2024,"

Thierry Wizman, global FX and rates strategist at Macquarie said

in a note. "That a Trump policy agenda will be associated with

U.S. inflation, not disinflation, and that the Fed's easing

cycle will, ultimately, be shallow, not deep."

The yen hit a six-week high against the dollar at

155.37 in early trading after a sharp rise on Wednesday that had

traders suspecting Japanese authorities were once again in the

market supporting the currency.

Bank of Japan data suggested Tokyo may have bought nearly 6

trillion yen last week to lift the frail yen away from the

38-year lows it has been rooted to since the start of the month.

The yen has dropped 9.5% against the dollar this year as the

wide interest rate difference between the U.S. and Japan weigh,

creating a lucrative trading opportunity, in which traders

borrow the yen at low rates to invest in dollar-priced assets

for a higher return, known as carry trade.

In commodities, gold was 0.18% higher at $2,462 per

ounce just below the record high of $2,483.60 it touched on

Wednesday.

(Editing by Jacqueline Wong)