Updates with afternoon trade

By Shivangi Lahiri and Nichiket Sunil

Jan 12 (Reuters) - South Korean equities closed at a record on Monday, with Taiwan and Singapore near all-time highs on artificial intelligence-led gains, while markets weighed the impact of a potential criminal indictment of Federal Reserve Chair Jerome Powell.

The MSCI index of emerging Asia equities .MIMS00000PUS advanced 0.6%. A broader index of global EM equities .MSCIEF and a subset of Asia-Pacific shares excluding Japan .MIAPJ0000PUS both rose 0.5%.

The U.S. dollar index =USD posted its steepest drop in three weeks against a basket of major currencies.

However, Fiona Lim, a senior forex strategist at Maybank says that the loss of Fed policy independence is still seen as a risk rather than a base case.

"And as such, the USD pullback is not likely to sustain for now," said Lim.

Most global brokerages have pushed back their forecasts for Fed rate cuts in 2026, while J.P. Morgan no longer expects one.

"Markets still have quite a bit of faith in the Fed's ability to ensure monetary policy independence, but we cannot rule out the possibility that the next chair could be more dovish and a loyalist to Trump," Lim said.

In East Asia, equities in Taipei .TWII climbed as much as 1.3% to a record and just shy of the 30,700-level. Those in Seoul .KS11 gained up to 1.4%.

Taiwanese and South Korean equities, extended last year's AI-driven outsized gains into 2026. The South Korean benchmark is up nearly 10% in seven sessions after a 75.6% rally in 2025, while the Taiwanese gauge added 25.7% last year.

Both benchmark indexes have started 2026 strongly as Asian markets outperform on solid semiconductor earnings momentum, particularly in memory chips dominated by regional players, said Rajat Agarwal, Asia equity strategist at Societe Generale.

In Southeast Asia, stocks in Singapore .STI advanced as much as 0.7%, while Philippine shares .PSI rose as much as 1.2% to their highest since July 25.

Thai stocks .SETI fell 0.5%, while the baht THB=TH rose 0.3% for a second consecutive session, with Maybank analysts citing strength in gold as a key support for the currency.

Currencies elsewhere in emerging Asia were a mixed bag, even though the dollar slipped. The Indonesian rupiah IDR= declined around 0.2%, while Malaysia's ringgit MYR= edged 0.2% higher.

The South Korean won KRW=KFTC slipped as much as 0.7% to its lowest since December 24, 2025, extending losses to a ninth session.

South Korean authorities summoned seven local banks to scrutinise a rise in U.S.-dollar deposits amid won weakness, officials and bank sources said. The country is set to open up its currency market to allow 24-hour trading starting in July.

HIGHLIGHTS:

** South Korea's Lee to head for Japan summit a week after meeting China's Xi

** China taps export controls veteran for senior trade post ahead of Trump visit

** Thai exports seen up 2% to 4% in 2026, shippers' group says

(Reporting by Shivangi Lahiri and Nichiket Sunil in Bengaluru; Editing by Subhranshu Sahu and Harikrishnan Nair)

((shivangi.lahiri@thomsonreuters.com))