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Asian equities rose on Wednesday, while the dollar was on the back foot after a steep spike overnight, with investors keenly awaiting minutes from the Federal Reserve's most recent meeting to gauge the path forward for interest rates.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.91%, set for a third straight day of gains for the year. The index fell 20% in 2022. Japan's Nikkei lost 1.12% in early trade, while Australia's S&P/ASX 200 index rose 1.28%.

Overnight, Wall Street's main indexes closed lower with the biggest drags from Tesla and Apple as U.S. equities make a slow start to the year after their steepest annual losses since 2008 in 2022. [.N]

China's stocks opened flat, while Hong Kong's Hang Seng Index opened roughly 1% higher. Investors have pinned their hopes on a swift post-COVID era recovery in China after the country started dismantling strict curbs.

"The market has made a pretty tentative start to the year ... (and) is still grappling with the notion of what we are going to see from the Fed this year," said Rob Carnell, head of ING's Asia-Pacific research.

"There are two camps out there and they are wrestling for dominance in terms of the view. Some days higher-for-longer wins some days higher-then-lower camp wins," Carnell said.

Minutes from the Fed's December meeting, when it cautioned rates may need to remain higher for longer, are due to be released later on Wednesday.

Investors will parse the minutes to figure out whether more policy tightening is likely.

Markets are pricing in rate cuts for late 2023, with fed fund futures implying a range of 4.25% to 4.5% by December.

Investors will get a better picture of the U.S. labour market this week, with several pieces of data scheduled in the week, culminating in the employment report on Friday. A weakening jobs market is seen as one of the key pieces needed to convince the Fed to begin slowing its monetary tightening path.

"It is too early to start betting on a Fed pivot this year and that should make this difficult environment for stocks," said Edward Moya, senior market analyst at Oanda in New York.

In the currency market, the euro was up 0.14% to $1.0561 in early Asian hours, not far off its three-week lows of $1.0519 it touched overnight. A surprise slowdown in German inflation rallied bunds and sent the common currency sliding.

The dollar index, which measures the greenback against six other currencies fell 0.162% after rising 1% overnight. Sterling was last trading at $1.1983, up 0.14% on the day. The pound fell 0.7% overnight.

The yield on 10-year Treasury notes was down 5.7 basis points to 3.735%, while the yield on the 30-year Treasury bond was down 4.5 basis points to 3.846%.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 3.7 basis points at 4.368%.

Oil prices steadied on Wednesday after diving 4.1% on Tuesday, the largest daily decline in more than three months, weighed by weak demand data from China, a gloomy economic outlook and a stronger U.S. dollar.

U.S. crude was 0.08% lower at $76.87 per barrel and Brent was at $82.13, up 0.04% on the day. [O/R]