(Updates at 0522 GMT)

By Ankur Banerjee

SINGAPORE, July 18 (Reuters) - Asian equities slid 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 was firm after scaling a six-week high following

suspected interventions by Tokyo.

The U.S. dollar loitered closed to 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 near record highs.

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

fell 0.63%, with a sub-index of IT stocks

down 2.5%. Tech-heavy South Korean shares

fell 1.5%, while Taiwan stocks were down 2%.

The yen's strength and the sharp drop in chip stocks took

Japan's Nikkei down more than 2%.

A report that the United States was considering tighter

curbs on exports of advanced semiconductor technology to China

triggered a sharp sell-off in chip stocks, with the Nasdaq

tumbling overnight.

"I think this volatility spike is now leading to some

broader risk reduction as investors worry about stretched

positioning," said Ben Bennett, Asia-Pacific investment

strategist at Legal and General Investment Management.

The European bourses were due for a mixed open, with

Eurostoxx 50 futures 0.14% lower while German DAX

futures were little changed and FTSE futures

edged up 0.5%.

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.

Broader risk sentiment also took a hit after Republican

presidential candidate Donald Trump said on Wednesday 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.

China stocks wavered as investors awaited policy news from a

key leadership gathering in Beijing. The Shanghai Composite

index was down 0.12% and the blue-chip CSI300 index

up 0.12%.

RATE CUT BETS

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 $1.093425, close to the four-month high it touched on

Wednesday. Sterling was last at $1.3001, just below the

one-year peak breached in the previous session.

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

versus six peers, was 0.1% higher at 103.78, not far from the

four-month low of 103.64 it touched on Wednesday.

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

155.375 in early trading after a sharp rise on Wednesday that

had traders suspecting Japanese authorities were once again in

the market supporting the currency. It was last at 156.

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.

Analysts though say that last week's suspected moves by

Tokyo might lead to traders unwinding some of their positions.

"It feels like the tide is shifting a little here and it's

generating some discomfort for yen funded carry traders," said

James Athey fixed income portfolio manager at Marlborough

Investment Management.

In commodities, gold was 0.34% higher at $2,466.62

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

Wednesday.

Oil prices were on the rise, with Brent futures 0.4%

higher at $85.45 a barrel, while U.S. West Texas Intermediate

(WTI) crude gained 0.7% to $83.43.

(Editing by Jacqueline Wong)