Wed Sep 18 06:08:00 UTC 2024: ## Dollar Retreats as Traders Await Fed Decision

**TOKYO:** The dollar weakened on Wednesday after overnight gains, with Asian stocks struggling as investors weighed the likelihood of a significant interest rate cut by the Federal Reserve later in the day.

The yen strengthened against the dollar, recovering nearly half of Tuesday’s gains. The U.S. currency’s rally had been fueled by strong retail sales data, which was perceived as reducing the need for aggressive easing by the Fed. However, short-term U.S. bond yields rose slightly, suggesting a potential for a 50 basis point rate cut.

The chances of a super-sized cut oscillated throughout the day, with analysts estimating a 65% likelihood. Japan’s Nikkei stock average initially climbed on the yen’s weakness but later pared gains as the currency rebounded. China’s blue-chip stocks fell after returning from a holiday weekend, while Taiwan and Australia also saw declines.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped by 0.27%. Hong Kong and South Korea were closed for holidays. Wall Street ended Tuesday nearly unchanged, failing to maintain early momentum that had pushed the S&P 500 and Dow to record highs.

Analysts remain divided on the Fed’s decision. Some anticipate a quarter-point cut, citing historical precedent, while others believe a larger cut is possible. The dollar’s response to a 50-basis-point cut could be volatile, potentially strengthening if it sparks fears about the U.S. economy, or weakening if it eases those concerns.

Gold dipped slightly, retreating from an all-time high, while oil prices also pulled back following recent gains. The Middle East remains a source of uncertainty, with Hezbollah vowing retaliation against Israel following attacks in Lebanon. Meanwhile, Libya’s central bank crisis, impacting oil production, remains unresolved.

The Fed’s decision is expected to have significant implications for global markets. A successful rate cut could fuel a bull market, while a misstep could signal a peak in the current economic cycle.

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