SINGAPORE, Nov 22 ― Asian stocks backed away from 2-1/2-month high yesterday and the dollar found support as investors' tempered some of their earlier enthusiasm about the prospect of an end to US rate hikes.

MSCI's broadest index of Asia-Pacific shares outside Japan has gained more than 3 per cent since a week ago and hit its highest since September yesterday. But it fell 0.2 per cent in early trade on Wednesday. Japan's Nikkei rose 0.5 per cent.

Overnight the S&P 500 snapped a five-session winning streak and fell 0.2 per cent. Chipmaker Nvidia reported revenue well above Wall St expectations after market close, but shares fell 1.7 per cent due to the company's downbeat China sales outlook.

Nasdaq futures were down 0.2 per cent and S&P 500 futures fell 0.1 per cent early in the Asia day. Volumes are likely to be lightened through the rest of the week by Thursday's Thanksgiving holiday in the United States.

"It appears that the short cover rally that began after the November (Fed meeting) is winding down and that buying and selling is beginning to alternate,” said Nomura's chief macro strategist Naka Matsuzawa in a note to clients.

The Federal Reserve released minutes from that meeting overnight though traders judged that policymakers' promise to "proceed carefully” from here was not new information.

Ten-year Treasury yields were marginally lower at 4.40 per cent in Asia trade. They have fallen about 50 basis points since the Fed held rates steady early in the month.

Interest rate futures markets see almost no chance the Fed hikes again and price about 90 basis points of rate cuts through 2024, with a 30 per cent chance they begin as soon as March.

"Since the (Fed) believes that a soft landing is in sight, it would be foolish to risk it by hiking further than necessary,” said Rabobank's senior US strategist Philip Marey.

"If we were to see stronger economic and inflation data before the December meeting, longer-term rates are likely to rebound and substitute for a rate hike. Therefore we do not expect further hikes.”

Prospects for the yen

In foreign exchange markets, the dollar, which has been sliding since last week's benign US inflation report, steadied overnight and lifted from multi-month lows on several peers.

It was broadly steady at US$1.0921 (RM5.08) to the euro and ¥148.17 in early trade today. The Australian dollar was held to US$0.6557 after recoiling yesterday from resistance at its 200-day moving average at US$0.6588.

"We expect bond yield gaps to remain a tailwind for the yen and renminbi as inflation in the US continues to moderate and investors discount more rate cuts from the Fed,” said Jonathan Petersen, senior economist at Capital Economics.

"On this front, prospects for the yen look particularly promising...risks are skewed towards the (Bank of Japan) again being an outlier in monetary policy, but this time raising its policy rate when most other major central banks are cutting.”

China's yuan, which has gained 2 per cent in the past week and led Asian currencies higher against the dollar steadied at 7.1356 at the open of onshore trade.

China's major state-owned banks have been buying the yuan to hasten its recovery lately, two sources told Reuters yesterday.

On the data front, bellwether Singapore's economy grew faster than initial estimates in the third quarter, helped by a resurgence in tourism.

Later on Wednesday Reserve Bank of Australia Governor Michele Bullock makes a speech and US jobless claims are due.

In commodity markets Brent crude futures held just above their 50-day moving average at US$82.64 a barrel. Singapore iron ore futures, up more than 10% for the month, held at US$131 a tonne.

Bitcoin wobbled lower to US$36,163 as Binance chief Changpeng Zhao stepped down and pleaded guilty to breaking US anti-money laundering laws as part of a US$4.3 billion settlement resolving a years-long probe into the crypto exchange. ― Reuters