Oil prices rose in early trade on Thursday as shrinking U.S. crude inventories signalled tighter supply, and amid rising hopes that the Federal Reserve would cut interest rates by the end of the year.

The dollar held tight ranges against most peers on Thursday as traders awaited key U.S. inflation data for cues on Federal Reserve policy, while the focus on the massive interest rate gap between Japan and the U.S. helped it make some gains on the yen.

Asian stocks lacked direction on Wednesday, while the dollar remained firm despite lower U.S. Treasury yields as markets assessed mixed signals from U.S. policymakers and economic data on the path for Federal Reserve interest rates.

Oil prices fell in early Asian trading hours on Wednesday after market sources said that data from the American Petroleum Institute showed an increase in U.S. crude and fuel stockpiles, an indicator of weak demand.

The dollar was back on the front foot on Wednesday, making modest gains after earlier losses from renewed bets on Federal Reserve rate cuts this year, while the yen eased towards the 155 per dollar level and kept intervention risks from Tokyo high.

Japanese service sector activity grew at the fastest pace in eight months in April thanks to solid business and consumer spending, a private survey showed on Tuesday, results that should keep the central bank on track to hike rates again this year.