By Ankur Banerjee

SINGAPORE (Reuters) - Asian equities rose on Wednesday and the dollar wobbled as weak U.S. labour data bolstered bets that the Federal Reserve was likely done with its interest rate hikes, while beaten-down China stocks rose for a third straight day.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.86% to a two-week top and is on a three-day winning streak. The index though is down 6% in August and set for its worst monthly performance since February.

Japan's Nikkei was up 0.5%, while the Australia's S&P/ASX 200 index rose 0.64%.

China shares have gained this week following the announcement of measures to lift investor confidence, including halving the stock trading stamp duty, loosening margin loan rules, and putting the brakes on new listings.

In early trading, the blue-chip CSI 300 Index was 0.3% higher, while Hong Kong's Hang Seng Index rose 0.75%.

Analysts though see a need for more action from Chinese authorities to sustain the rally. "It will take more resolute policy measures and a sustainable recovery in earnings in order for the rally to last," Carlos Casanova, senior economist for Asia at UBP, said.  

Investors' focus will be on PMI data from China later this week that will highlight the state of the economy.

Overnight, Wall Street ended sharply higher, while Treasury yields slid to three-week lows after data showed U.S. job openings dropped to the lowest level in nearly 2-1/2 years in July, signalling easing labour market pressures. [.N]

"'Bad news is good news,' as the data supported bets for a sooner end of the Fed's hiking cycle despite the recent hawkish rhetoric of Fed Chair Powell," Tina Teng, markets analyst at CMC Markets (LON:CMCX), said in a note.

With the Fed highlighting that the interest rate path will be heavily dependent on data, traders are tweaking their bets based on the latest indicators.

Markets are pricing in an 89% chance of the Fed standing pat at its meeting next month, the CME FedWatch tool showed, and are now pricing in a 50% chance of another pause at the November meeting compared with a 38% chance a day earlier.

A much clearer economic picture will likely be revealed later in the week when U.S. payrolls and personal consumption expenditure reports are due.

U.S. Treasury yields were stable in Asian hours. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 1.3 basis points at 4.903%, easing away from the three week low of 4.871% it touched on Tuesday. [US/]

The drop in yields put pressure on a buoyant dollar. [FRX/] Against a basket of currencies, the dollar inched up 0.029% to 103.58 after slipping nearly 0.4% on Tuesday.

The yen weakened 0.15% to 146.09 per dollar and remained at levels that led to intervention in the currency market last year by Japanese authorities.

The Australian dollar fell 0.32% to $0.646 after data showed Australian consumer price inflation slowed to a 17-month low in July, signalling that interest rates might not have to rise again.

U.S. crude rose 0.32% to $81.42 per barrel and Brent was at $85.69, up 0.23%. Both benchmarks rallied more than a dollar a barrel on Tuesday on a soft dollar. [O/R]

Traders will be closely watching cocoa prices on Wednesday after the London cocoa futures on ICE rose to a 46-year high on Tuesday, buoyed by tightening supplies.

Top cryptocurrency bitcoin eased a bit in early Asian hours to trade at $27,554 after rising 7% on Tuesday. A federal appeals court ruled on Tuesday that the U.S. securities regulator was wrong to reject an application from Grayscale Investments to create a spot bitcoin exchange-traded fund.