By Tom Westbrook

SINGAPORE Stocks were struggling to advance in Asia and the dollar was firm on Wednesday ahead of U.S. consumer price data that could damage hopes for interest rate cuts if inflation fails to show much of a decline.

MSCI's broadest index of Asia-Pacific shares outside Japan had fallen on Tuesday and inched down a further 0.4% on Wednesday. Japan's Nikkei fell 0.3%.

S&P 500 futures were steady and European futures rose 0.1%. A firm U.S. dollar pushed the euro back below $1.10 to $1.0968.

April U.S. consumer price data is due at 1230 GMT and economists expect the headline CPI to hold steady at an annual 5% and core CPI to moderate very slightly to 5.5%, though anything stickier could confound bets interest rates will fall.

"That's the thing that'd get taken out if CPI numbers come in on the higher side," said ING economist Rob Carnell.

"It doesn't look particularly sensible if inflation is falling at too slow a rate and that could feed through into higher longer-term treasury yields as well."

Interest rate futures imply about a 60% chance the Federal Reserve cuts rates in September, according to the CME FedWatch tool.

Treasuries were broadly steady, with brinkmanship over the approaching U.S. debt ceiling fuelling demand for safe assets, including bonds, on one hand, while also driving investors out of T-bills maturing in early June.

President Joe Biden and top lawmakers failed to break a deadlock over raising the $31.4 trillion U.S. debt limit, but vowed to meet again before June, when the Treasury projects it will start struggling to meet its obligations.

Benchmark 10-year yields held at 3.517% in Asia. Two-year yields were at 4.049%.

CPI WATCH

China's weak import figures for April held down Chinese and Hong Kong stocks for a second straight session, as investors fret the reopening rebound is fading into an uneven recovery.

Hong Kong's Hang Seng fell 0.5%. The Shanghai Composite dropped 1.3% and the yuan fell to a two-week trough.

An apparent crackdown on due diligence firms is roiling the sector and unnerving investors. Reuters reported CICC Capital, a unit of leading Chinese investment bank China International Capital Corp stopped using consultancy Capvision.

Foreign exchange markets have been treading water while markets weigh policymakers' rhetoric against traders' conviction that U.S. interest rates, and the dollar, should fall.

JP Morgan's G7 FX volatility index sat at a one-year low.

European Central Bank board member Isabel Schnabel said on Tuesday expectations for rate cuts were misplaced, but that didn't give the euro much of a boost, as traders have been reluctant to sell dollars too hard ahead of the CPI data.

The common currency was pinned below $1.10 on Wednesday. The dollar was also firm at 135.34 yen and has lifted slightly from recent lows on the Aussie, kiwi and sterling.

"The dollar may receive a temporary boost after the CPI," said Commonwealth Bank of Australia strategist Joe Capurso.

"But the debt ceiling drama, and market participants’ focus on rate cuts is unlikely to change much from one CPI report. It may take a strong result ... to push up the dollar materially."

Earnings for Softbank, Panasonic and a handful of Japan's giant bellwether trading houses are due after market close in Tokyo on Wednesday.

Brent crude futures hovered at $76.90 a barrel. Gold is starting to settle in above $2,000 an ounce, while bitcoin steadied at $27,732.

(Editing by Simon Cameron-Moore and Jacqueline Wong)