By Tom Westbrook

SINGAPORE (Reuters) - Asia's stockmarkets rose on Wednesday and the dollar beat a retreat as a dovish shift in tone from Federal Reserve officials had traders paring U.S. interest rate expectations, though with a wary eye on U.S. inflation data due on Thursday.

The S&P 500 gained overnight and MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.3% to a two-week high in morning trade. Japan's Nikkei rose 0.5%.

"I actually don't think we need to increase rates anymore," Atlanta Fed President Raphael Bostic told the American Bankers Association, to applause, in Nashville on Tuesday.

The remark follows several Fed officials noting that recent rises in longer-term yields may help do the work of tightening financial conditions and crimping inflation, leaving the central bank with less to do in terms of short-term rate levels.

Wagers on whether the Fed might hike again this year have pulled back a bit this week and Treasury yields have come sharply down from 16-year highs, yanking the dollar with them.

The 10-year yield fell 12.7 basis points on Tuesday and was steady in Asia on Wednesday at 4.64%, after touching 4.884% in the wake of strong U.S. jobs data on Friday.

On Wednesday the Australian and New Zealand dollars hit their highest levels on the dollar since the end of September, while sterling hit a three-week peak. The euro held at $1.0607, near Tuesday's two-week high.

Moves were small, however, while traders waited on the U.S. CPI figures.

"Signs underlying U.S. inflation is moderating could reinforce the more watchful tone from U.S. Fed members about future policy, exerting more pressure on the dollar," said Peter Dragicevich, strategist at cross-border payments firm Corpay.

A Bloomberg News report on China preparing stimulus to help its economy also supported the mood, though nerves remained as giant developer Country Garden warned it wasn't going to be able to meet its offshore payment obligations on time.

PIPE DOWN

In commodity markets oil prices have crept lower since bouncing on Monday on concern that Palestinian militants' surprise attack on Israel could spark a wider conflict.

Brent crude futures steadied at $87.80 a barrel on Wednesday, after hitting $89 on Monday. European gas prices, which had jumped on news of the Middle East violence, surged further on Tuesday on concern a gas pipe in Finland was sabotaged.

The subsea link connecting Finland with Estonia, which may take months to repair, was shut on Sunday and on Tuesday Finland's president said the damage was likely the result of "outside activity". Benchmark Dutch gas touched a seven-month high on Tuesday and settled 14% higher.

"Europe has higher than usual gas stockpiles for this time of year, as well as lower than normal gas demand, but these buffers still leave Europe exposed to a colder than usual winter and LNG imports in coming months," said CBA analyst Vivek Dhar.

Elsewhere the yen has clung to a small bounce made as the Middle East tension has supported safe-haven assets. U.S. stock futures were steady in Asia.

Samsung (KS:005930) shares jumped on a smaller-than-expected dive in third-quarter profit and on hopes the memory chip market is finally turning.

Pepsi began U.S. earnings season overnight with an upbeat report showing only a small 2.5% dip in volume but prices up 11% and the company's chief financial officer saying more rises are coming next year.

"Making more money with slimmer volumes is not a horrible outcome," said Sam Rines, managing director at research firm CORBU in Texas.

"With the angst around the consumer and snacks palatable, it is notable that Pepsi gave 2024 guidance and commentary ahead of schedule. And Pepsi’s management team was rather sanguine on the current state of the consumer."