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By Rajasik Mukherjee

June 23 (Reuters) - Asian equities retreated on Tuesday from recent record highs as rising expectations of U.S. rate hikes weighed on sentiment, while South Korean shares plunged 10% on profit-taking, triggering a temporary trading curb.

Most emerging Asian currencies also came under pressure as a firm U.S. dollar weighed, with the Thai baht THB=TH down 0.6%, hitting its lowest since May 20, 2025, a day ahead of its policy meeting.

"Policy decision is due this week...we expect a hold given domestic economic weakness whilst El Nino threatens to hit the country's agricultural sector hard. Therefore, the carry is going to remain unfavorable against the THB," Maybank analysts said in a note.

Meanwhile, shares in Jakarta .JKSE fell 1% and the rupiah IDR= weakened to 17,860 per dollar, ahead of MSCI's verdict on the country's market classification, due in early Asian hours on Wednesday.

Globally, the pan-European STOXX 600 index .STOXX fell 0.89%, while oil and gold prices fell more than 1% each, as investors assessed U.S.-Iran peace talks.

TECH SLUMP, HAWKISH FED

The MSCI EM Asia equities index .MIMS00000PUS dropped more than 4% after reaching an all-time high on Monday, dragged lower by the slump in South Korea .KS11 and Taiwan .TWII, which together account for about 60% of the benchmark.

The MSCI index was set for its worst session since June 8.

South Korea's KOSPI .KS11, the region's best-performing stock market so far this year, closed 10% lower, marking its largest daily drop since March 4, driven by foreign selling of Samsung Electronics and SK Hynix following regulatory signals that the chip rally had become overheated.

Major chipmakers Samsung Electronics 005930.KS and SK Hynix 000660.KS both shed over 12%.

Taiwan's benchmark gauge .TWII, another AI-heavy index in the region, slipped 1.3% from an all-time closing high seen the previous day.

"Taiwan and Korea are so heavily weighted towards technology and AI-related themes that it should come as no surprise that we are seeing a correction...In Korea, there are concerns about leveraged retail investors," said Angus Mackintosh, ASEAN specialist at Aletheia Capital.

Meanwhile, traders are grappling with expectations of an accelerated schedule of rate hikes by a more aggressive U.S. Federal Reserve under the leadership of new Chair Kevin Warsh.

Fed funds futures are pricing in a 75% chance of a hike by September, while BofA Global Research and Deutsche Bank have abandoned prior forecasts of steady policy and now expect the U.S. central bank to raise rates within the year.

"The Fed was perceived more hawkish than expected and markets have reacted by lifting the USD against most currencies," said Fiona Lim, senior FX strategist, Maybank Singapore.

The dollar index =USD, which measures the greenback against a basket of major currencies, edged slightly higher to 101.06, not far from the one-year high of 101.12 hit late last week.

The Philippine peso PHP= slipped 0.3% to 61.166 per dollar while the benchmark gauge .PSI jumped 1.5%.

In Malaysia, stocks .KLSE edged lower, while the ringgit MYR= rebounded from a seven-month low to trade 0.2% higher at 4.139.

HIGHLIGHTS:

** Yield on Indonesia's 10-year government bonds ID10YT=RR jumps 8.9 bps to 7.218%

** Thai cabinet approves $115 billion draft budget bill for 2027 fiscal year, official says

** Indonesia's emerging markets crown on the line as MSCI verdict looms

Asia stock indexes and currencies at 0727 GMT
COUNTRY	FX RIC	FX DAILY %	FX YTD %	INDEX	STOCKS DAILY %	STOCKS YTD %
Japan	JPY=	+0.06	-2.97	.N225	-3.55	38.6
China	CNY=CFXS	-0.07	+3.04	.SSEC	-1.37	3.46
India	INR=IN	-0.22	-5.29	.NSEI	-0.61	-8.32
Indonesia	IDR=	-0.20	-6.66	.JKSE	-1.02	-29.99
Malaysia	MYR=	+0.17	-2.01	.KLSE	-0.70	0.52
Philippines	PHP=	-0.30	-3.87	.PSI	1.51	1.21
S.Korea	KRW=KFTC	-0.03	-6.49	.KS11	-9.99	94.67
Singapore	SGD=	-0.09	-0.66	.STI	0.26	12.30
Taiwan	TWD=TP	-0.03	-0.64	.TWII	-1.34	62.62
Thailand	THB=TH	-0.53	-5.00	.SETI	-1.23	23.42