As investors awaited a critical U.S. inflation report to provide signals about the Federal Reserve's future monetary tightening plans, Asian stocks declined, and the dollar remained stable on Wednesday.

The Consumer Price Index (CPI) report will be issued later today, with markets monitoring for indications that inflation moderated in July despite last week's surprisingly good U.S. employment data.

MSCI's broadest index of Asia-Pacific equities excluding Japan sank 0.51 percent, while Japan's Nikkei extended losses from the previous session and fell 0.65 percent.

The KOSPI declined 0.64 percent, the AXJO down 0.12 percent, and the TAIEX plummeted 0.70 percent.

David Chao, a global market strategist for Asia Pacific ex-Japan at Invesco, stated, "I don’t think that we are through the bear market woods yet – recession risks loom and I don’t think the Fed is done with its aggressive belt tightening,"

"I believe markets have not completely accounted for these variables. Certainly, this week's inflation statistics will shed more light on the Fed's near-term policy stance."

Asian markets followed Wall Street's declines on Tuesday when all three leading indices closed in the red.

The S&P 500 sank 0.42 percent, the Dow Jones Industrial Average declined 0.18 percent, and the Nasdaq Composite fell 1.18 percent.

The dollar erased overnight losses and was trading unchanged in Asia. At $106.330, the dollar index, which compares the safe-haven greenback to six major counterparts, was down 0.009%.

"A strong CPI print this week could mean the Fed is back to its aggressive rate hiking path, which would re-strengthen the USD," said Chao.

After a rise overnight, oil prices declined little. Brent crude futures were down 15 cents to $96.16 per barrel, while West Texas Intermediate (WTI) crude fell 22 cents to $90.28 per barrel.

Gold also lost ground, falling 0.09% to $1,792.54 per ounce. Overnight, it momentarily surpassed the $1,800 threshold for the first time in over a month.

Cryptocurrency Bitcoin, which frequently mirrors tech companies, fell 1.08% to $22,891.40.