Updates for afternoon trade

By Roushni Nair

March 5 (Reuters) - Malaysian markets were steady on Thursday, after Bank Negara kept interest rates unchanged as expected, while Asian equities rebounded on optimism that Washington and Tehran may move to cool hostilities after a bruising multi-day sell-off.

The ringgit MYR= was little changed, edging slightly softer on the day, but remained up nearly 3% year-to-date, making it the region's best-performing currency.

Kuala Lumpur shares .KLSE rose 0.7%, bringing year‑to‑date gains to almost 2%.

Investors have been comfortable staying long on the ringgit through local bonds, as the currency's rebound and stable policy settings improve unhedged returns.

"Being a net oil exporter, Malaysia's terms of trade should also improve on the back of higher oil prices, lending support for the ringgit," said MUFG currency analyst Lloyd Chan.

Adding to the policy backdrop, China, South East Asia's largest trading partner, set a slightly lower growth target than last year in its closely watched economic plan, signalling broadly steady settings for 2026.

Across the region, sentiment improved after Wednesday's rout, when benchmark indexes in both Seoul and Bangkok triggered circuit breakers following drops of more than 8%.

The MSCI emerging Asia index .MIMS00000PUS rose 3% on the day, snapping a four-day slide and clawing back part of the near-10% it had lost.

South Korea's KOSPI .KS11 closed up 9.6%, ending three straight days of declines and recovering nearly all of Wednesday's record plunge. The index had fallen nearly 17% over the previous three sessions.

The rebound followed a New York Times report that Iran's intelligence ministry had signalled openness to talks with the CIA to end the war.

Still, Maybank said the drivers were murky even though the sentiment looked firmer, calling the report puzzling as the purported outreach had occurred days earlier and Tehran had publicly denied any intention to negotiate.

Taipei shares .TWII closed up 2.6% after sliding about 5% over the past three sessions. Jakarta stocks .JKSE gained more than 2.5% after a 6.5% drop over the same period, shrugging off recent Moody’s and Fitch outlook revisions citing rising policy uncertainty.

Oil prices remained elevated as the U.S.–Iran war widened on Wednesday, when a U.S. submarine sank an Iranian warship off the coast of Sri Lanka, killing at least 80 people.

Elsewhere, stock moves were modest, with indexes in India .NSEI and the Singapore .PSI up more than 0.6% each.

Most regional currencies eased as the U.S. dollar index =USD firmed 0.3%.

The Philippine peso PHP= and the Thai baht THB=TH led losses, down 0.3% each, while the Singapore dollar SGD= and the South Korean won KRW=KFTC fell 0.2%.

HIGHLIGHTS:

** Philippine February inflation quickens to 2.4% y/y, fastest in a year

** Thai February headline CPI eases more than forecast to 0.88% on-year

(Reporting by Roushni Nair in Bengaluru; Editing by Sumana Nandy and Kevin Buckland)

((Roushni.nair@thomsonreuters.com))