(Updates prices as of 0545 GMT)

By Stella Qiu

SYDNEY, April 17 (Reuters) - Asian shares steadied from

a recent sell-off on Wednesday although investors remain wary

after 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.

Europe is set for a subdued open, with EUROSTOXX 50

futures flat on the day. U.S. stock futures

slipped 0.1% after Wall Street finished the day lower.

The dollar's surprising resilience this year is causing

discomfort in Asia's currency markets. The beleaguered yen

is plumbing fresh 34-year lows on an almost daily

basis, the Chinese yuan is pinned near five-month

troughs and Vietnam's dong is at record lows.

The New Zealand dollar gained 0.4% to $0.5902

after first-quarter inflation data showed domestically driven

price pressures were surprisingly strong, adding to signs that

the last mile to get inflation back to target could be bumpy.

On Wednesday, MSCI's broadest index of Asia-Pacific

shares outside Japan rose 0.1%, after plunging

more than 4% in the past three sessions. Japan's Nikkei,

however, dropped 0.8% to the lowest in two months.

Taiwanese shares outperformed with a gain of

1.6%, as the chip-making giant Taiwan Semiconductor

Manufacturing Co ( TSM ) rose 2% ahead of its earnings

results. Shanghai Composite index gained 1.2% after the

securities regulator clarified the new listing rules to calm the

recent market panic.

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.

Two-year Treasury yields retested 5%

overnight and were last at 4.9855%, while 10-years

held near a five-month high at 4.6655% on diminishing

expectations of Federal Reserve policy easing this year.

"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 10-year

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 106.39. The beleaguered yen 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.

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

Australian government bond yield rose 5 basis points

to 4.371%, the highest this year.

In commodities, oil prices slipped on Wednesday as demand

concerns outweighed heightened tension in the Middle East. Brent

futures fell 0.5% to $89.53 a barrel, while U.S. crude

dropped 0.7% to $84.81 a barrel.

Gold prices eased 0.2% to $2,376.79 per ounce,

slipping away from a record high of $2,431.29.