Asian shares steady, oil rises as crude inventories decline

TOKYO (Reuters) - Asian shares and the dollar got off to a steady start on Wednesday, while oil prices recovered after data showed a drop in U.S. supply.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was flat, while Japan's Nikkei stock average added 0.6 percent in early trade, after marking a seven-year closing high on Tuesday.

Wall Street posted solid gains on Tuesday, with the Dow Jones industrial average <.DJI> closing at a record high, boosted by gains in energy shares as investors searched for bargains in the sector.

U.S. crude was up more than 1 percent to $67.76 a barrel in early Asian trading, after industry group American Petroleum Institute (API) released data showing U.S. crude stocks fell 6.5 million barrels last week. [API/S]

In recently volatile trade amid massive oversupply, U.S. crude tumbled on Tuesday after rising 4 percent on Monday, its biggest gain since August 2012.

Saudi Arabia would only consider cutting production if other countries, including non-OPEC producer Russia, joined in limits, former Saudi intelligence chief Prince Turki bin Faisal said on Tuesday.

While economists fear the sharp drop in global energy prices could fan deflationary pressures in some countries, both New York Fed President William Dudley and Vice Chair Stanley Fischer this week both painted a mostly rosy outlook for the U.S. economy and welcomed the cheaper oil.

"Both were relatively optimistic on the U.S. economy and went out of their way to stress upside benefits to U.S. economy of weaker oil prices," Steven Englander, global head of G10 foreign exchange strategy at CitiFX, said in a note.

"All of this is extremely positive for USD, given that fed funds has priced in an extremely flat policy hike path and the USD looks extremely sensitive to interest rate differentials in the current environment," he added.

Rising Treasury yields added to the appeal of the U.S. dollar on Wednesday. The benchmark 10-year Treasury yield ticked up to 2.292 percent in Asian trade, up from its U.S. close of 2.285 percent.

The greenback was steady at 119.23 yen , not far from its Tuesday high of 119.29, That was its strongest level since August 2007, when it rose as high as 119.84.

The euro was flat on the day at $1.2385 .

The dollar's recent strength has weighed on spot gold which dipped 0.2 percent to $1,196.30 an ounce on Wednesday.

(Editing by Shri Navaratnam)

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