(Updates prices at 0515 GMT)

By Rae Wee and Sameer Manekar

SINGAPORE, July 10 (Reuters) - Asian stocks hovered near

two-year highs on Wednesday on growing bets of imminent U.S.

rate cuts, while the New Zealand dollar slid after its central

bank signalled greater confidence that inflation was coming to

heel.

The Reserve Bank of New Zealand (RBNZ) held its cash rate

steady at 5.5% on Wednesday as expected, but noted that

inflation was expected to return to its target range of 1% to 3%

in the second half of the year.

The kiwi fell more than 0.7% in the aftermath of

the decision and was last at 0.54% lower at $0.6092, as traders

sharply ramped up bets of RBNZ rate cuts later this year.

"Them kind of saying the CPI is going to drop back into

target in the second half of this year... that CPI expectations

could normalise more rapidly, I think that contributed," said

Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

"Compared to the more hawkish statement, the tone they had

in the May meeting, that stood out."

Swaps now imply more than 30 basis points worth of easing in

October, as compared to 16 bps prior to the outcome.

The Aussie, meanwhile, rallied 0.6% to touch an over

one-year high against the New Zealand dollar, with

the former underpinned by wagers that the next move in

Australian rates might be up given inflation is proving

stubborn.

MSCI's broadest index of Asia-Pacific shares outside Japan

eased 0.16%, but remained close to the more than

two-year high hit at the start of the week.

Japan's Nikkei rose 0.5%, while Hong Kong's Hang

Seng Index edged up 0.1%.

S&P 500 futures gained 0.05%, while Nasdaq futures

firmed 0.14%. EUROSTOXX 50 futures tacked on

0.2%.

Stocks have rallied globally on the back of growing

expectations of a Fed easing cycle likely to commence in

September, with Powell saying on Tuesday that the U.S. is "no

longer an overheated economy".

However, he provided little clues on how soon those rate

cuts could come.

"If the labour market shows signs of cooling, so long as

inflation data doesn't move higher and stays where it is, that

might be enough to still deliver some music from the Fed," said

Rob Carnell, ING's regional head of research for Asia Pacific.

The closely-watched U.S. inflation report is due on

Thursday, where expectations are for core consumer prices to

have held steady on a monthly basis in June.

DOLLAR RESILIENT

Markets are now pricing in an over 70% chance of a Fed cut

in September, compared to a near-even chance a month ago,

according to the CME FedWatch tool.

Still, the rise in U.S. rate cut expectations have done

little to sway the dollar, which remained broadly on the

front foot on Wednesday.

That left sterling and the euro little

changed at $1.2791 and $1.0817, respectively.

Against the yen, the dollar rose 0.15% to 161.54,

as the Japanese currency continued to be pressured by stark

interest rate differentials between the U.S. and Japan.

But data on Wednesday showed Japan's wholesale inflation

accelerated in June as the yen's declines pushed up the cost of

raw material imports, keeping alive market expectations for a

near-term interest rate hike by the central bank.

The Bank of Japan said on Tuesday that some market players

called on the central bank to slow its bond buying to roughly

half the current pace under a scheduled tapering plan due this

month.

Elsewhere in Asia, data on Wednesday showed China's consumer

prices grew for a fifth month in June but missed expectations,

while the producer price deflation persisted, as government

support measures set a bumpy recovery in motion for the world's

second-largest economy.

The onshore yuan fell to its weakest level since

November in the wake of the downbeat data and last stood at

7.2756 per dollar.

Its offshore counterpart similarly fell 0.05% to

7.2919 per dollar.

In commodities, oil prices ticked lower. Brent futures

fell 0.32% to $84.39 a barrel, while U.S. West Texas

Intermediate (WTI) crude eased 0.25% to $81.21 per

barrel.

Gold gained 0.26% to $2,369.89 an ounce.

(Editing by Muralikumar Anantharaman)