* China state banks seen buying USD to ease yuan rally - traders
* Taiwan finds fist case of new coronavirus variant
* Sime Darby shares weigh on Malaysian benchmark
By Pranav A K and Anushka Trivedi
Dec 31 (Reuters) - Asian currencies were on course to finish the pandemic-hit year on a positive note, with the Malaysian ringgit leading gains on Thursday as broader sentiment was lifted by hopes of a vaccine-led economic recovery.
The Chinese yuan CNY=CFXS , however, held back as traders suspected state-owned banks were buying dollars to curb the currency from rising too fast and breaching a key level of 6.5 per dollar. yuan has risen rapidly since May and is set to mark its first annual gain in three as a weaker dollar, the widening yield gap between China and the United States and Beijing's effective coronavirus containment underpinned gains in the currency.
Other emerging currencies in the region were broadly firmer after the dollar .DXY weakened as investors continued to bet that COVID-19 vaccine rollouts will help the economy towards a more sustainable recovery.
"A smooth vaccine rollout can be a game-changer," said Christopher Wong, a senior foreign exchange strategist at Maybank
"Global economy could be closer to a more sustainable recovery trajectory amid unprecedented fiscal and monetary support."
China's outperformance has also helped regional units, with the Taiwanese dollar TWD=TP on course to be the best performer in Asia this year as it firmed as much as 1.5% to take annual gains to about 7%.
Investors have lauded the island's handling of the pandemic, while a global shift to working remotely boosted demand for its tech products.
Malaysian ringgit MYR= strengthened 0.6% on Thursday, while Singapore dollar SGD= also gained some ground.
Emerging Asia's currencies stand to benefit from a recovery in economic growth next year, with trade-linked Taiwan dollar, Singapore dollar, won and yuan appearing as winners, whereas low interest-rate and inflation environment should support the region's carry trade favourites, Wong said.
A slump in shares of Sime Darby Plantation SIPL.KL knocked Malaysian stock index .KLSE sharply lower after the United States banned imports of palm oil from the producer over allegations of forced labour. markets in the Philippines, Indonesia, Thailand, Japan and South Korea were closed for a holiday.
HIGHLIGHTS:
** Singapore GDP to extend decline in Q4 - Reuters poll
** Top losers on FTSE Bursa Malaysia Kl Index .KLSE include Sime Darby Plantation Bhd SIPL.KL , down 3.29%, and Press Metal Aluminium Holdings Bhd PMET.KL , down 1.88%
** Singapore's 10-year benchmark yield is down 1.7 basis points at 0.839%
Asia stock indexes and currencies at
0458 GMT
COUNTRY
FX RIC
FX DAILY % FX YTD
INDEX STOCKS DAILY % STOCKS YTD %
%
Japan
+0.02 +5.29 .N225
0.00
16.01 China
CNY=CFXS
-0.08 +6.63 .SSEC
0.83
12.87 India
INR=IN
+0.30 -2.33 .NSEI
0.04
14.95 Malaysia
+0.62 +1.97 .KLSE
-0.55
2.93 Philippines
+0.00 +5.50 .PSI
0.00
-8.64 Singapore
+0.01 +1.63 .STI
-0.89
-11.76 Taiwan
TWD=TP
+0.00 +5.61 .TWII
0.16
22.63