By Tom Westbrook

SINGAPORE (Reuters) – The dollar was attempting to steady in Asia on Wednesday, as investors dialled back bets on U.S. rate cuts and fear of a banking crisis ebbed – though a looming hike in Europe had the euro on a firm footing.

The European Central Bank meets on Thursday and markets think a 50 basis point hike is likely, a more hawkish stance than traders expect from the U.S. Federal Reserve next week.

The euro touched a month high $1.0760 in the Asia session before drifting back to flat at $1.0744. Elsewhere, the last few days’ selling pressure on the dollar was abating.

The dollar rose 0.4% to 134.72 yen, even as wage talks delivered the biggest pay increases in a quarter century which are likely to pressure monetary policy settings in Japan.

Recent rallies in sterling, Scandinavian currencies, the Australian dollar and the New Zealand dollar also seemed to lose steam – though without really giving back any ground.

Banking stocks bounced and bonds and interest rate futures have given back some of the huge gains they logged following the collapse of three U.S. banks in a matter of days.

“When all the dust clears I think we’ll end up with a dollar not being quite as strong and the flow of data will probably resume the centre stage,” Westpac strategist Imre Speizer said.

“I think we end up with a lower Fed peak than was priced a week ago and all else equal that should result in the U.S. dollar being a bit weaker than where it was a week ago.”

Interest rate futures pricing now implies an 80% chance of a 25 basis point U.S. rate hike next week.

That is a lot more dovish than a week ago when markets priced a similar chance of a 50 bp hike, but it is also a lot more hawkish than a day ago when crisis fears had traders pricing a 50% chance of a hold and steep cuts later in the year.

U.S. consumer prices also increased solidly in February, keeping the pressure on policymakers to contain inflation.

Sterling, up about 1% for the week, steadied at $1.2149. The New Zealand dollar dipped 0.4% to $0.6210 and the Aussie, up 1.5% for the week so far, was flat at $0.6679 as investors caught their breath.

Together with steadier stock markets and relative calm in bonds, the moves suggest the immediate fears of contagion in the U.S. banking system have reduced following the failure of Silicon Valley Bank (SVB) last week.

The strong performance this week, however, for the safe-haven Swiss franc, which is up more than 3% in five days, shows the elevated levels of concern in markets.

Chinese economic activity indicators came in mixed in the Asia session, with retail sales strength extending but property investment falling. It gave a brief boost to the Australian dollar that soon faded. The yuan inched lower.

(Reporting by Tom Westbrook; Editing by Himani Sarkar)