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SYDNEY  - Asian shares retreated from two-week highs on Thursday and China started on the backfoot on fears central banks were closer to considering winding back their emergency stimulus while the dollar held at a one-week top.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.5% at 691.76, still not too far from Wednesday's high of 696.76, a level last seen on May 10.

Chinese shares started weaker with the blue-chip index off 0.2%.

Australian shares were flat while New Zealand's benchmark index stumbled 0.9%, extending losses for a second day in a row after the country's central bank on Wednesday signalled rate rises from next year.

Japan's Nikkei was down 0.8%. E-Mini futures for the S&P 500 were down 0.2%.

Global equities markets have been supported by a concerted effort from major central banks who have pumped trillions of dollars in financial markets since last year while reiterating their lower-for-longer interest rate stance as they seek to cast any inflation rise as temporary.

Earlier this week, U.S. Federal Reserve Vice Chair Richard Clarida said he believed recent inflation pressures would “prove to be largely transitory,” though he did add that policymakers will be at a point to begin discussing tapering in upcoming meetings.

"While the efforts by various Fed speakers appeared to have assuaged market concerns, doubt remains," said GSFM investment strategist Stephen Miller.

"Clarida’s comments imply that the Fed may be a little bit more advanced than the 'not thinking about thinking' about monetary tightening that Chairman Jerome Powell characterised as the Fed’s stance last year -  but only just a bit."

Overnight, the Fed Vice Chair for supervision, Randal Quarles, suggested that at some stage it will become important for the Fed to discuss plans to tighten its asset purchase programme.

"What that means is that after a period where monthly inflation reports have largely been sidelined as a market focus, that they once again assume primacy they once enjoyed as the statistical report that matters," Miller added.

On Wall Street, all three main indexes closed higher driven by consumer discretionary, communication services and financial sectors.

The Dow was a touch firmer, the S&P 500 gained 0.2% and the Nasdaq Composite added 0.6%.

The dollar index was at a one-week top of 90.152.

The euro fell to $1.2173, falling for a second straight session after the European Central Bank's (ECB) Executive Board’s Director, Fabio Panetta said it was too early to taper its emergency bond buying programme.

The New Zealand dollar was among the best performing currencies overnight. On Thursday, it retreated from a three-month top of $0.7317 to be last as $0.7270.

In commodities, gold prices fell below $1,900 per ounce, its appeal dimmed by a rebounding dollar and U.S. Treasury yields.

Spot gold shed 0.2% to $1,892.06 per ounce after hitting its highest since Jan. 8 at $1,912.50.

Oil prices were weaker too with Brent off 20 cents at $68.76 a barrel and U.S. crude down 19 cents at $66.02 a barrel.