* Indonesia shares track worst day since May 19 * Bank of Japan keeps monetary policy steady * Graphic: World FX rates tmsnrt.rs/2RBWI5E * Asian stock markets: tmsnrt.rs/2zpUAr4 By Shashwat Awasthi June 18 (Reuters) - Indonesia"s rupiah hovered near a one-month low and stocks slid 1% on Friday as rising COVID-19 cases continued to erode risk sentiment, while investors across the region further digested the U.S. Federal Reserve"s hawkish signals this week. The rupiah weakened for the fifth straight session and fell as much as 0.3%, a day after Bank Indonesia (BI) held its benchmark rate at a record low and pledged to ensure the currency remained stable. Jakarta"s stock index shed 1.2% and was set to post its first weekly drop in four after Indonesia on Thursday reported its biggest daily rise in coronavirus cases since late-January. The rupiah has rallied more than 2% since April but was set to lose more than 1% this week. Analysts believe BI will hold on rates this year, but spiking infections and the Fed"s indication of raising rates earlier could heap pressure on the currency. "Going forward, given subdued inflation pressures and the nascent recovery, we expect Bank Indonesia to keep the policy rate unchanged this year," Goldman Sachs analysts said. "However, we view risks around BI policy as skewed in a hawkish direction, particularly if further Fed communications or upside U.S. data surprises cause FX market pressures to intensify." Currencies across the rest of emerging Asia remained mixed, though South Korea"s won fell for the fifth consecutive day. The Fed"s sudden turn on Wednesday revitalised the dollar and U.S. Treasury yields, diminishing the attraction of emerging market currencies for carry trade - whereby investors borrow low-yielding currencies and convert them to buy assets where returns are higher. Morgan Stanley analysts recommended cashing out of long positions in many Asian currencies, including the rupiah and the Malaysian ringgit, and held a bearish view after the Fed readout. "The most important reason why we have been recommending carry trades in Asia was a patient/dovish Fed... Now the conditions have changed materially on the back of a hawkish surprise from the Fed," they said in a note. Riskier currencies, such as those of emerging markets, thrive on U.S. interest rates remaining low because they benefit from the interest rate differential that increases their appeal for carry trade. Taiwan"s dollar inched 0.1% lower and stock advanced marginally after its central bank on Thursday stood pat on interest rates but hiked the island"s growth outlook for the year. Recently high-flying Philippine shares extended losses from the previous day and gave up 0.4%, despite its central bank"s assertion on Thursday that it had enough measures to counter any macroeconomic fallout from the Fed"s policy shift. HIGHLIGHTS ** Indonesian 10-year benchmark yields are up 5.8 basis points at 6.534%. ** Top losers on the Jakarta stock index include MegaPower Makmur, Mulia Industrindo and Bank IBK Indonesia, all down 7%. ** In the Philippines, top losers are Metropolitan Bank and Trust down 2.9%, Puregold Price Club down 2.1% and JG Summit Holdings down 2.1%. Asia stock indexes and currencies at 0337 GMT COUNTRY FX RIC FX DAILY % FX YTD % INDEX STOCKS DAILY % STOCKS YTD % Japan +0.01 -6.31 0.31 6.06 China +0.08 +1.31 -0.38 1.13 India +0.00 -1.37 0.00 12.23 Indonesia -0.24 -2.40 -1.00 0.48 Malaysia -0.05 -2.90 0.12 -3.35 Philippines +0.23 -0.64 -0.22 -3.73 S.Korea -0.09 -4.00 0.21 13.86 Singapore +0.22 -1.39 -0.29 10.04 Taiwan -0.12 +2.47 -0.17 17.85 Thailand +0.16 -4.43 -0.13 11.47 (Reporting by Shashwat Awasthi in Bengaluru; Editing by Simon Cameron-Moore) Our Standards: The Thomson Reuters Trust Principles.