MANILA, Sept 20 : Most Asian currencies were subdued on Tuesday as investors braced for a hefty U.S. Federal Reserve interest rate hike this week to combat inflation, while regional equities rose after catching the tailwind from a bounce on Wall Street.

The Philippine peso declined 0.2% to hit a record low and Malaysia's ringgit hit a 24-1/2-year low, while South Korean won bucked the somber regional trend to strengthen 0.3% as the currency, described by some analysts as equity-sensitive, gained on a rebound in Asian share markets.

The Federal Reserve is expected to raise its policy rate by at least 75 basis points on Wednesday, while investors are also awaiting the US central bank's future policy projections.

"Asian markets are pretty much in a holding pattern anticipating the Federal Open Market Committee's (FOMC) rate decision," said Khoon Goh, head of Asia research at ANZ.

Interest rate hikes are expected not only in the United States, but also in Asia, where a number of central banks are meeting this week.

Indonesia and the Philippines are likely to raise rates, but the Bank of Japan has shown no signs of renouncing its dovish monetary policy despite the yen's sharp fall.

"If the BOJ governor continues to maintain a fairly dovish stance, then that will just accentuate the widening differential between the US and Japan interest rates. And that will put further pressure on the Japanese yen," Goh said.

The weakness in Japan's yen broadened as it dipped 0.2% after data showed the country's core consumer inflation quickened to 2.8% in August.

Higher interest rates have caused a sell-off in government bonds, with the yield on benchmark 10-year Treasury notes hovering near their highest levels since 2011.

Higher yields aided the dollar's strength, which remained firm below a two-decade high versus major peers, and the dollar's and yields' persistent rise has weighed heavily on riskier Asian assets.

China kept its benchmark lending rates for September unchanged, as expected, as authorities appeared to hold off immediate monetary easing following rapid decline in the local currency and as central banks elsewhere tightened policy. The yuan was down 0.1% at 7.0096 on Tuesday.

Shares in Asia tracked a rebound in the final hour of New York trading as markets were fully priced for a rise in interest rates this week, with equities in Mumbai leading gains among regional peers, climbing 1.6%.

"Overnight dip-buying being presented in Wall Street ... seems to provide an uplift for risk sentiment in the Asia session, although a tone of caution still largely lingers ahead of the FOMC meeting," said Jun Rong Yeap, market strategist at IG.

Equities in Kuala Lampur and Taiwan rose 0.9% each, while shares in Seoul climbed 0.5%.

 - Reuters