(Updates prices at 0230 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 to $0.6079 as analysts said the tone from

policymakers was comparatively more dovish than that of May's

policy decision.

"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."

Traders were also quick to ramp up bets of rate cuts from

the RBNZ later this year, with swaps now implying about 30 basis

points worth of easing in October, as compared to 16 bps prior

to the outcome.

The Aussie, meanwhile, rallied more than 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

gained 0.09% and remained close to the more than

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

Japan's Nikkei rose 0.13%, while Hong Kong's Hang

Seng Index climbed about 1%.

Chinese blue chips ticked 0.19% higher.

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, Powell provided little clues on how soon those rate

cuts could come.

"He suggested that the Fed's reaction function is shifting

to an easing bias given the significantly cooling labour market,

but he nonetheless declined to offer a clear timeline on rate

cuts," said RBC Capital Markets' Tan.

"In any event, the market has been pricing in almost two

full Fed rate cuts this year, and Powell's statements didn't

shift those expectations much."

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 flat at $1.2787, while the euro

was little changed at $1.0815.

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

7.2757 per dollar.

Its offshore counterpart similarly fell 0.03% to

7.2902 per dollar.

In commodities, oil prices ticked lower. Brent futures

fell 0.11% to $84.57 a barrel, while U.S. West Texas

Intermediate (WTI) crude eased 0.01% to $81.40 per

barrel.

Gold gained 0.2% to $2,368.15 an ounce.

(Editing by Muralikumar Anantharaman)