Asian stocks tread water, dollar holds gains after Fed minutes

Fed minutes show many officials think it is premature to hike rates in June

Asian stocks treaded water early on Thursday, with overnight Wall Street losses acting as a drag, while the dollar held to broad gains after minutes from the Federal Reserve's April minutes contained no major surprises.

The closely-watched Fed meeting minutes showed many officials saw it as premature to hike interest rates in June, which did not take the markets by surprise.

The US economy has shown signs of strength - the latest being this week's upbeat housing data - but overall recovery has not been as robust as expected. The economy grew by a modest 0.2% in the first quarter.

"A 'few' participants anticipated that the economy could make enough progress toward the dual mandate (of full employment and stable prices) to warrant a June rate hike, although 'many' thought it unlikely that the data available by the June FOMC meeting would justify a hike. We maintain our view of a first hike in September," strategists at Barclays said.

Treasuries yields spiked earlier in the month along with a rout in euro zone bonds, but the two bond markets have recently shown signs of decoupling. The surge in euro zone bonds stalled this week, partly in response to European Central Bank policymakers saying the central bank would ramp up its bond buying.

The dollar fetched 121.23 yen , not too far from a two-month peak of 121.49 struck overnight. The euro hovered near a two-week low of $1.1062 , having slid from a three-month peak of $1.1468 touched late last week.

MSCI's broadest index of Asia-Pacific shares outside Japan stood effectively flat amid a subdued start for South Korean and Australian stocks. Japan's Nikkei inched up 0.1%.

The region's risk asset markets awaited the flash HSBC manufacturing index due at 0145 GMT for cues.

Any fresh signs of a slowdown in China's economy was expected to further fuel expectations of more monetary easing, possibly supporting Chinese equities as it has often been the case recently with soft data.

The Australian dollar, sensitive to the economic fortunes of China, was steady at $0.7880 and in reach of a two-week trough of $0.7861. A sharp drop in prices of iron ore, Australia's main export commodity, has weighed on the Aussie.

In commodities US crude lost 19 cents to $58.79 a barrel. Oil prices had rebounded on Wednesday after a five-day decline, but a large supply overhang and concerns over a strong dollar have weighed on the market.