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 Stocks were struggling to advance in Asia and the dollar was firm on Wednesday ahead of U.S. consumer price data that could damage hopes for interest rate cuts later this year if inflation fails to show much of a decline.

MSCI's broadest index of Asia-Pacific shares outside Japan had fallen on Tuesday and inched down a further 0.3% early on Wednesday. Japan's Nikkei fell 0.4%.

Overnight the S&P 500 fell 0.5% and S&P 500 futures were steady in the Asian morning. A firm U.S. dollar pushed the euro back below $1.10 to $1.0971.

April U.S. consumer price data is due at 1230 GMT and economists expect the headline CPI to hold steady at an annual 5% and core CPI to moderate very slightly to 5.5%, though anything stickier could confound bets interest rates will fall.

"That's the thing that'd get taken out if CPI numbers come in on the higher side," said ING economist Rob Carnell.

"It doesn't look particularly sensible if inflation is falling at too slow a rate and that could feed through into higher longer-term treasury yields as well."

Treasuries were broadly steady overnight, though debt-ceiling brinkmanship is warping the bills market as investors avoid bills maturing early in June.

Demand at a three-year auction was strong, with a bid-to-cover ratio of 2.93 - the highest since 2018 according to analysts at NatWest markets.

Benchmark 10-year yields held at 3.507% in Asia. Two-year yields were at 4.018%.

President Joe Biden and top lawmakers failed to break a deadlock over raising the $31.4 trillion U.S. debt limit, but vowed to meet again with just weeks before the country may be forced into an unprecedented default.

The uncertainty is ironically driving demand for bonds, however T-Bills maturing early in June are out of favour and yielding 5.6% - the highest in decades and above the Fed funds rate.

CPI WATCH

In China and Hong Kong April's weak import figures held down stocks for a second straight session, as investors fret the reopening rebound is fading into an uneven recovery.

Hong Kong's Hang Seng fell 0.4%. The Shanghai Composite dropped 0.8% and the yuan edged lower. An apparent crackdown on due diligence firms is also unnerving investors.

Foreign exchange markets have been treading water while markets weigh policymakers' rhetoric against traders conviction that U.S. interest rates, and the dollar, should fall.

European Central Bank board member Isabel Schnabel said on Tuesday expectations for rate cuts were misplaced, but that didn't give the euro much of a boost against a dollar, as traders have been reluctant to sell too hard ahead of the CPI data.

The common currency was pinned below $1.10 on Wednesday. The dollar was also firm at 135.14 yen and has lifted slightly from recent lows on the Aussie, kiwi and sterling.

"The dollar may receive a temporary boost after the CPI," said Commonwealth Bank of Australia strategist Joe Capurso.

"But the debt ceiling drama, and market participants’ focus on rate cuts is unlikely to change much from one CPI report. It may take a strong result ... to push up the dollar materially."

Earnings for Softbank, Panasonic and a handful of Japan's giant bellwether trading houses are due after market close in Tokyo on Wednesday.

Shares in U.S. casino operator Wynn Resorts were steady in after-hours trading after it reported better-than-expected revenues. Airbnb shares fell about 12% after the bell as it forecast fewer bookings and lower prices.

Brent crude futures hovered at $77.01 a barrel. Gold is starting to settle in above $2,000 an ounce, while bitcoin steadied at $27.732.