SINGAPORE: Asian shares rose to their highest in three weeks on Wednesday, buoyed by a rally in tech stocks, while the dollar wobbled after soft U.S. retail sales data reinforced expectations of the Federal Reserve cutting rates later this year.

MSCI's broadest index of Asia-Pacific shares outside Japan was 0.72% higher, with the tech stocks in the region up 1.6% at a record high.

Japan's Nikkei rose 0.59%, while blue chip stocks in China were 0.42% lower. Hong Kong's Hang Seng index rose 1.3%.

Data on Tuesday showed U.S. retail sales barely rose in May and data for the prior month was revised considerably lower, suggesting economic activity remained lacklustre in the second quarter.

The data led to a small boost in rate cut expectations for September with traders pricing in a 67% chance of easing compared to a 61% chance a day earlier, CME FedWatch tool showed. Markets are pricing in 48 basis points of cuts this year.

"(The) Fed will need more data to support its case for a rate cut and investors should not overact to one or two data points," said Vasu Menon, managing director of investment strategy at OCBC.

Last week, mild U.S. inflation readings contrasted with an overall hawkish stance by Fed officials, who trimmed their previous median projection for three quarter-point rate cuts this year to one.

"Rate cuts are a stronger story for 2025 but that's fine because there is hope that it will happen in a bigger way over the next two years even if 2024 remains uncertain, and that will keep markets supported," Menon said.

Fed officials, heartened by recent data, are looking for further confirmation that inflation is cooling and for any warning signs from a still-strong labour market as they steer cautiously toward what most expect to be an interest rate cut or two by the end of this year.

The S&P 500 and Nasdaq closed at record highs on Tuesday, with Nvidia dethroning tech heavyweight Microsoft to become the world's most valuable company.

U.S. markets are closed on Wednesday, which will likely result in subdued trading throughout the day.

In currency markets, the dollar index, which measures the U.S. unit against six rivals, was last at 105.29, while the euro steadied at $1.0738.

The single currency has been under pressure in the wake of French President Emmanuel Macron calling for a snap election following a trouncing of his ruling centrist party in the European Parliament elections.

Sterling was flat at $1.2704 in early trading ahead of UK inflation data due later in the day that will set the stage for Bank of England (BoE) policy decision on Thursday, with the central bank widely expected to stand pat on rates.

The inflation report is expected to show Britain's inflation rate fell back to the BoE's 2% target in May, from 2.3% in April.

Kyle Chapman, FX markets analyst at Ballinger Group, said Wednesday's May inflation report will be the deciding factor and a cut could still be on the table if services inflation gets back on track.

"Unless it collapses, I think we will need a few pieces of evidence to convince the Bank of England that it is sustainably on the way down," he said.

In Asia, the Japanese yen was little changed at 157.83 per dollar, hovering close to the six-week low of 158.255 it touched last week. The currency remains under pressure from the wide difference between interest rates in Japan and the United States.

Minutes of Bank of Japan's April policy meeting showed policymakers debated the impact a weak yen could have on prices, with some flagging the chance of raising interest rates sooner than expected if inflation overshoots.

In commodities, oil prices wobbled as concerns over escalating conflicts between Russia and Ukraine and in the Middle East offset demand worries following an unexpected build in U.S. crude inventories.

(Reporting by Ankur Banerjee; Editing by Jamie Freed)