TOKYO: Stocks fell across Asia and the dollar steadied on Wednesday as investors were reluctant to make moves ahead of the release of U.S. inflation data that could point to the Federal Reserve's appetite for more aggressive rate hikes.

The Consumer Price Index (CPI) report will be released at 1230 GMT, with markets watching for signs that inflation eased in July despite last week's unexpectedly strong U.S. jobs numbers.

The market is currently pricing in a 69.5% chance of a 75 bps rate hike at the Fed's next meeting. Economists polled by Reuters expect the CPI to show year-on-year headline inflation of 8.7%, far above the Fed's target of 2% but down from last month's red-hot 9.1%.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.31%, while Japan's Nikkei extended losses from the previous day and closed down 0.65%.

South Korea's KOSPI lost 0.95%, Australia's AXJO dropped 0.5%, and Taiwan's TAIEX fell 0.74%.

European stock futures pointed to further losses ahead of markets opening. FTSE 100 futures were down 0.31%, and Euro Stoxx 50 futures were down 0.38%.

"I don’t think that we are through the bear market woods yet - recession risks loom and I don’t think the Fed is done with its aggressive belt tightening," said David Chao, a global market strategist for Asia Pacific ex-Japan at Invesco.

"I don’t think markets have fully discounted these variables. This week’s inflation data will certainly give us more clarity of the Fed’s near-term policy outlook."

The slips in Asian markets tracked Wall Street, which closed on Tuesday with all three major indices down.

The S&P 500 fell 0.42%, the Dow Jones Industrial Average dropped 0.18%, and the Nasdaq Composite lost 1.19%.

The dollar reversed losses overnight and was trading flat in Asia. The dollar index, which measures the safe-haven greenback against six major peers, was at 106.3.

"A strong CPI print this week could mean the Fed is back to its aggressive rate hiking path, which would re-strengthen the USD," said Chao.

Oil prices fell after an overnight surge petered out. Brent crude futures were down 78 cents to $95.53 a barrel, while U.S. West Texas Intermediate (WTI) crude was down 56 cents to $89.94.

Gold also pared gains and was down 0.33% at $1,788.30 an ounce. It briefly broke through the $1,800 barrier overnight for the first time in more than a month.

The cryptocurrency bitcoin, which often tracks tech stocks, was down 1.15% at $22,880.

 - Reuters