SYDNEY, April 17 (Reuters) - Asian shares were mixed on

Wednesday as the world's most powerful central banker had a

change of heart on U.S. rate cuts this year, pushing Treasury

yields to new five-month highs and the dollar towering against

other currencies.

The beleaguered yen is plumbing fresh 34-year lows

on an almost daily basis. It was last steady at 154.62 per

dollar as the risk of government intervention loomed, although

so far there has been no action from Tokyo apart from verbal

warnings.

The New Zealand dollar gained 0.4% to $0.5902 after

first-quarter inflation data showed domestically driven

inflation was surprisingly strong. Markets now see just 34 basis

points in total easing this year, down from 60 bps a week ago.

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

rose 0.2%, after plunging more than 4% in the

past three sessions. Taiwanese shares outperformed with

a gain of 1%, while other markets were lacklustre.

Japan's Nikkei, however, dropped 0.7% to the lowest

in two months. China's blue chips fell 0.1%, while

Hong Kong's Hang Seng index edged 0.1% higher.

Wall Street stocks ended slightly lower on Tuesday, helped a

little by still-robust corporate earnings. Two-year Treasury

yields retested 5% overnight and were last at

4.9828%, while 10-years held near a five-month high

at 4.6674% on diminishing expectations of Federal Reserve policy

easing this year.

Fed Chair Jerome Powell said recent inflation data, with

three months of upside surprises, had not given policymakers

enough confidence to ease policy soon. He noted the central bank

may need to keep rates higher for longer than previously

thought.

Markets have already slashed the amount of easing expected

this year to fewer than two rate cuts, a sea change from about

six cuts predicted at the beginning of the year. The first rate

cut is still expected in September, although the market's

confidence in that has declined.

"Now Chair Powell has caved. Surprising in fact that we've

not had a bigger reaction. But we think that's coming, or at

least part of a process that will ultimately see the 10yr back

in the 5% area," said Benjamin Schroeder, a senior rates

strategist at ING, referring to U.S. Treasuries.

"Given what we have seen so far from the inflation data, the

market would be excused had it decided to downsize the discount

for a September cut in a more dramatic fashion."

The International Monetary Fund said on Tuesday the global

economy is set for another year of slow but steady growth, with

U.S. strength pushing world output through headwinds from

lingering high inflation, weak demand in China and Europe and

spillovers from two regional wars.

Geopolitical tensions in the Middle East are still running

high. Israel vowed to respond to Iran's weekend attack despite

international calls for restraint, although its war cabinet put

off a meeting to decide on its response until Wednesday.

In currencies, the dollar index measuring the

greenback against its major peers was buoyant near a 5-1/2-month

high at 106.3.

Asian bonds extended the sell-off in Treasuries. The 10-year

Australian government bond yield rose 6 basis points

to 4.387%, the highest this year.

The global shift in interest rate expectation has seen

markets pushing out the chances of any cut from the Reserve Bank

of Australia this year. They only see a 50/50 probability of a

first cut in December, meaning even one cut is not guaranteed.

In commodities, oil prices slipped on Wednesday as demand

concerns outweighed heightened tension in the Middle East. Brent

futures fell 0.4% to $89.68 a barrel, while U.S. crude

dropped 0.5% to $84.95 a barrel.

Gold prices held at $2,384.29 per ounce, not too

far from a record high of $2,431.29.