* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Asian markets mostly firmer, Nikkei lags in early trade
* Markets wager Fed Chair Powell will sound dovish enough
* Dollar supported as Treasury yields edge up from lows
*
By Wayne Cole
SYDNEY, July 10 (Reuters) - Asian shares inched ahead on Wednesday while higher Treasury yields lifted the dollar as markets wondered if the world's most powerful central banker would confirm or confound expectations for U.S. policy easing this month.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS advanced 0.2%, after three sessions of losses.
South Korea .KS11 climbed 0.6%, but Japan's Nikkei .N225 lagged with a loss of 0.15%. E-Mini futures for the S&P 500 ESc1 added a slim 0.08%.
Federal Reserve Chair Jerome Powell testifies before the U.S. Congress on Wednesday and Thursday and investors have a lot riding on him sounding suitably dovish.
Futures 0#FF: are still fully priced for a 25-basis-point cut at the Fed's July 30-31 meeting, but have abandoned wagers on a half-point move. They had implied a 25% probability of an aggressive cut before Friday's upbeat jobs report. FEDWATCH
"We still think the odds favour of a 25 bps "insurance" cut," said Kevin Cummins (NYSE:CMI), a senior U.S. economist at NatWest Markets.
"The Fed's consideration of rate cuts is not only about growth but also about inflation, which remains well below target, and inflation expectations, which were breaking to the downside before the Fed signalled the likelihood of cuts."
Overnight, Atlanta Fed bank president Raphael Bostic let nothing out of the bag by saying the central bank was debating the risks and benefits of letting the U.S. economy run "a little hotter." in the background, U.S. and Chinese trade officials held "constructive" talks on trade by phone on Tuesday, White House economic adviser Larry Kudlow said. Street had been dully circumspect, with the Dow .DJI ending Tuesday down 0.08%, while the S&P 500 .SPX added 0.12% and the Nasdaq .IXIC 0.54%.
MORE YIELD
The cooling in U.S. rate fever has seen bonds give back just a little of their huge rally, with yields on two-year Treasuries US2YT=TWEB rising to 1.909% from the recent trough of 1.696%.
That in turn has helped the dollar bounce on a basket of currencies to 97.537 .DXY from a June low of 95.843.
The dollar also firmed to 108.96 yen JPY= , while the euro faded to $1.1204 EUR= having been as high as $1.1412 just a couple of weeks ago.
The Mexican peso MXN= was nursing a few bruises after sliding on Tuesday when the country's moderate Finance Minister Carlos Urzua suddenly resigned, citing "extremism" in economic policy. Canadian dollar CAD= was on the defensive ahead of a rate meeting by the Bank of Canada in case policy makers tried to slow the currency's recent rally. CAD/
The dollar's gains took the shine off gold, which eased 0.3% to $1,393.14 per ounce XAU= .
Oil prices were supported by Middle East tensions and OPEC supply cuts. O/R
Brent crude LCOc1 futures rose 67 cents to $64.83, while U.S. crude CLc1 gained 83 cents to $58.66 a barrel.
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