SINGAPORE, May 31 (Reuters) - Asian stocks rose on

Friday and were poised for the fourth month of gains, while the

dollar drifted lower, keeping the yen steady as investors await

inflation readings from Europe and the U.S. that will likely

dictate the path of interest rates globally.

A downward revision to consumer spending meant the U.S.

economy grew more slowly than expected in the first quarter,

data showed on Thursday, weighing on Treasury yields and the

dollar.

The economic data also stoked expectations that the Federal

Reserve has scope to cut rates this year, with market pricing

putting a September cut at a coin toss, CME FedWatch tool

showed. For the year, traders are pricing in 35 basis points of

easing.

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

rose 0.55%, pushing away from the three-week low

hit on Thursday. The index is set for a 1.4% decline for the

week but is up 2.7% in May, rising for the fourth straight

month.

Japan's Nikkei was up 0.20% and is flat for the

month. China stocks also rose, with the blue-chip index

up 0.23% while Hong Kong's Hang Seng index spiking

1.3% higher.

The upturn in China's markets came even as the nation's

manufacturing activity unexpectedly fell in May, an official

factory survey showed on Friday. The soft outcome kept alive

calls for fresh stimulus as a protracted property crisis

continues to weigh on businesses, consumers and investors.

Financial markets have been biding their time for the main

data event of the week - Friday's April report on U.S. core

personal consumption expenditures (PCE) price index, which is

the Fed's preferred inflation gauge.

Tony Sycamore, market analyst at IG, said the market is

taking a more cautious approach to the European and U.S. PCE

inflation data after upside surprises in Australia and German

inflation reports earlier this week.

Federal Reserve policymakers continue to expect inflation to

fall this year even as the labour market stays strong, leaving

them in no hurry to cut the policy rate from the 5.25%-5.5%

range they have kept it in since last July.

Elsewhere, traders are also warily looking over their

shoulders for any hints of intervention from the Tokyo

authorities as the Japanese yen flirts with levels

that led to suspected bouts of intervention late in April and

early this month.

The yen was last at 156.74 per dollar, having touched

four-week lows of 157.715 on Wednesday. The currency weakened to

its lowest in 34 years at 160.245 on April 29, sparking at least

two suspected rounds of interventions.

The Japanese authorities have been relatively restrained in

their recent verbal warnings, possibly waiting for weaker U.S.

economic data and a shift in Fed policy to support the yen,

according to Charu Chanana, head of currency strategy at Saxo.

But with the Fed looking likely to cut rates only towards

the end of the year, the frail yen has been caught in the

crosshairs of the vast gap between U.S. and Japan yields, with

traders using the yen to fund their investments in higher

yielding currencies.

Data on Friday showed core consumer prices in Japan's

capital rose 1.9% in May on rising electricity bills but price

growth excluding the effect of fuel eased, heightening

uncertainty on the timing of the central bank's next interest

rate hike.

"Even if the BOJ raises rates in June or July, the increase

is expected to be minimal and unlikely to significantly close

the gap with US interest rates," Chanana said, noting that

movements in dollar/yen towards the 155 level could attract more

carry trade interest.

The dollar index, which measures the U.S. currency

against six rivals, was at 104.77, on course for 1.5% decline in

May, snapping a four-month winning streak.

The euro last fetched $1.0828 ahead of inflation

report from euro zone that is set to influence the European

Central Bank's policy path. The central bank is all but certain

to cut rates in June but what comes after that remains

uncertain.

Markets are pricing 60 basis points of ECB cuts this year.

In commodities, oil prices eased after a surprise build in

U.S. gasoline stocks weighed on the market. Brent

futures was down 0.31% at $81.61 a barrel, while U.S. West Texas

Intermediate (WTI) crude CLc1 was down 0.36% at $77.63.

Gold prices rose 0.12% to $2,345.93, on course for over 2%

gain in May.

(Editing by Shri Navaratnam)