Dollar slips, Asian shares mixed as Fed closes Reuters

By Kevin Buckland

TOKYO (Reuters) – The dollar gave up some of its overnight gains on Wednesday as Asian shares turned in a mixed display as traders weighed the chances of a very big Federal Reserve interest rate cut later in the day .

The U.S. currency fell sharply against the yen, giving back a third of Tuesday’s gains as unexpectedly robust U.S. retail sales data was seen as weakening the case for aggressive Fed easing.

The euro also advanced, recovering almost all of the previous day’s decline.

The odds that the Fed will kick off its easing cycle with a super-sized 50 basis point (bps) rate cut wobbled in Asia, retreating to 63% early in the day from 67% around the same time on Tuesday, according to LSEG data. However, as of 0137 GMT, the odds were back to 65%.

Japanese stocks were the only strong gainers in the region, rising 0.72 percent to close 1 percent on Tuesday, as the benchmark continued to be weighed down by the dollar-yen exchange rate.

Mainland China blue chips opened flat after coming back online after an extended holiday weekend, and Taiwan also returned from a day off to trade 0.35% lower. Australia’s benchmark has been little changed.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.05 percent.

Hong Kong and South Korea were among the major markets closed for the holidays.

Wall Street ended largely unchanged on Tuesday, failing to sustain early momentum that also pushed the Dow to record intraday highs. indicated 0.08% higher on Wednesday.

“(U.S.) price action conveys the significant inflection point facing markets,” said Kyle Rodda, senior financial market analyst at Capital.com.

“If the Fed gets to this meeting, the bull market could charge. If it doesn’t, then it could signal a high in this cycle.”

The dollar was down 0.55 percent at 141.60 yen, although that followed a 1.26 percent gain overnight.

The euro added 0.12% to $1.1128.

It fell 0.07 percent to 100.84 after rising 0.3 percent on Tuesday.

Short-term Treasury yields continued to rise, however, with the two-year note adding another basis point to 3.6028% in Asian time.

Gold found its feet, climbing 0.15 percent to $2,573.18 an ounce, after falling from an all-time high in the previous session.

Crude oil was steady after gaining about $1 a barrel on Wednesday amid rising tensions in the Middle East.

The militant group Hezbollah vowed revenge on Israel after pagers detonated in Lebanon on Tuesday, killing at least eight people and injuring nearly 3,000 others.

Meanwhile, the UN mission in Libya said the factions had not reached a final agreement in talks aimed at resolving the central bank crisis, which has reduced oil production and exports.

Futures fell 13 cents to $71.06 in the latest session, and futures fell 14 cents to $73.56.