TRADE IDEA-Go long Asian currency basket vs euro - UBS

SINGAPORE, Sept 2 (Reuters) - Investors should buy into an equal-weighted basket of Indian rupee, Taiwan dollar and Malaysian ringgit against the euro through three-month forwards, analysts at UBS said on Tuesday.

"We think these currencies could still likely retreat against the dollar given the broad-based dollar rebound. But we think with still firm domestic fundamentals for each of these Asian economies, should see these currencies doing better against the ailing euro," the analysts said in a note.

The central banks in Taiwan, India and Malaysia were unlikely to tolerate excessive currency weakness on a trade-weighted basis as they would still keep vigilance on inflation, despite signs that price rises are cooling in the region, they said.

"In an environment of firm dollar, it seems likely that these central banks would tolerate currency strength against the euro instead," they said.

In addition, solid current account surpluses in Taiwan and Malaysia would help underpin their currencies, they said, suggesting that investors should target a 5 percent profit.

The euro fell below $1.45 EUR= for the first time since February as the rapid oil price decline stoked expectations lower inflation ahead will allow the European Central Bank to cut interest rates in the coming months.

In Asia, the Indian rupee fell nearly 0.7 percent to 44.47 against the dollar INR=IN but it gained one percent to 63.805 versus the euro EURINR=R.

The Taiwan dollar TWD=TP fell 31.85 per U.S. dollar, but it rose slightly versus the euro to 45.98 EURTWD=R.

Likewise, the ringgit MYR= fell to 3.4270 to the dollar but it still gained against the euro to 4.9516 EURMYR=R.