(Updates prices as of 0545 GMT)
Asian shares steadied from a recent sell-off on Wednesday although investors remain wary after the world's most powerful central banker had a change of heart on U.S. rate cuts this year, pushing Treasury yields to new five-month highs.
Europe is set for a subdued open, with EUROSTOXX 50 futures STXEc1 flat on the day. U.S. stock futures ESc1 NQc1 slipped 0.1% after Wall Street finished the day lower.
The dollar's surprising resilience this year is causing discomfort in Asia's currency markets. The beleaguered yen JPY=EBS is plumbing fresh 34-year lows on an almost daily basis, the Chinese yuan CNY=CFXS is pinned near five-month troughs and Vietnam's dong VND=VN is at record lows.
The New Zealand dollar NZD=D3 gained 0.4% to $0.5902 after first-quarter inflation data showed domestically driven price pressures were surprisingly strong, adding to signs that the last mile to get inflation back to target could be bumpy.
On Wednesday, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.1%, after plunging more than 4% in the past three sessions. Japan's Nikkei .N225 , however, dropped 0.8% to the lowest in two months.
Taiwanese shares .TWII outperformed with a gain of 1.6%, as the chip-making giant Taiwan Semiconductor Manufacturing Co 2330.TW rose 2% ahead of its earnings results. Shanghai Composite index .SSEC gained 1.2% after the securities regulator clarified the new listing rules to calm the recent market panic.
Fed Chair Jerome Powell said recent inflation data, with three months of upside surprises, had not given policymakers enough confidence to ease policy soon. He noted the central bank may need to keep rates higher for longer than previously thought.
Markets have already slashed the amount of easing expected this year to fewer than two rate cuts, a sea change from about six cuts predicted at the beginning of the year. The first rate cut is still expected in September, although the market's confidence in that has declined. FEDWATCH
Two-year Treasury yields US2YT=RR retested 5% overnight and were last at 4.9855%, while 10-years US10YT=RR held near a five-month high at 4.6655% on diminishing expectations of Federal Reserve policy easing this year.
"Now Chair Powell has caved. Surprising in fact that we've not had a bigger reaction. But we think that's coming, or at least part of a process that will ultimately see the 10-year back in the 5% area," said Benjamin Schroeder, a senior rates strategist at ING, referring to U.S. Treasuries.
"Given what we have seen so far from the inflation data, the market would be excused had it decided to downsize the discount for a September cut in a more dramatic fashion."
The International Monetary Fund said on Tuesday the global economy is set for another year of slow but steady growth, with U.S. strength pushing world output through headwinds from lingering high inflation, weak demand in China and Europe and spillovers from two regional wars.
Geopolitical tensions in the Middle East are still running high. Israel vowed to respond to Iran's weekend attack despite international calls for restraint, although its war cabinet put off a meeting to decide on its response until Wednesday.
In currencies, the dollar index .DXY measuring the greenback against its major peers was buoyant near a 5-1/2-month high at 106.39. The beleaguered yen was last steady at 154.62 per dollar as the risk of government intervention loomed, although so far there has been no action from Tokyo apart from verbal warnings.
Asian bonds extended the sell-off in Treasuries. The 10-year Australian government bond yield AU10YT=RR rose 5 basis points to 4.371%, the highest this year.
In commodities, oil prices slipped on Wednesday as demand concerns outweighed heightened tension in the Middle East. Brent LCOc1 futures fell 0.5% to $89.53 a barrel, while U.S. crude CLc1 dropped 0.7% to $84.81 a barrel.
Gold prices XAU= eased 0.2% to $2,376.79 per ounce, slipping away from a record high of $2,431.29.
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