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Investors await pivotal Nvidia ( NVDA ) earnings after Fed drama

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Fed independence under threat, leads Treasury yields to

steepen

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Dollar under pressure on rate-cut wagers

By Ankur Banerjee

SINGAPORE, Aug 27 (Reuters) - Asian stocks were steady

on Wednesday ahead of an earnings report from AI leader Nvidia ( NVDA )

that will shape near-term risk sentiment, while the

U.S. dollar was frail as investors remained nervous about

attacks on Federal Reserve autonomy.

The U.S. Treasury yield curve has been steepening since

President Donald Trump on Monday ordered the firing of Federal

Reserve Governor Lisa Cook, an unprecedented move that could

lead to a legal tussle after a lawyer for Cook said she will

file a lawsuit to prevent it.

"The Fed has said it will abide by any decision the court

makes on Lisa Cook but the reality is the Fed is in a bind,"

said Prashant Newnaha, senior Asia-Pacific rates strategist at

TD Securities.

"If the court ends up ruling in favour of Trump, this

potentially puts Chair (Jerome) Powell in line to be fired for

permitting a non-Fed employee to make decisions on behalf of the

Fed Board" should Cook continue to serve between Trump's firing

and the court's decision.

Shorter-dated yields fell more than longer-dated ones,

causing the yield curve to steepen. The yield on the two-year

note, which typically moves in step with interest

rate expectations, hit its lowest since May at 3.654% in early

Asian hours, while the yield on the 30-year note was

1.5 basis point higher at 4.923%.

Trump has repeatedly criticised Powell and policymakers for

not cutting interest rates. Market watchers interpreted Powell

comments last week as indicating cuts could be on the way.

That has led to investors wagering a cut next month, with

traders pricing in an 84% chance of the Fed moving in September

and expecting more than 100 bps of easing by June.

"Markets are anticipating a scenario where Trump holds the

majority on the Board of Governors setting the stage for cuts to

come sooner and potentially faster," said Newnaha.

After an initial sharp drop in the dollar after Trump's

comment, the greenback remained near those lows. The euro

last fetched $1.1636, while the yen was steady at

147.6 a dollar.

"I think investors are focused more on the upcoming payroll

print and what that means for a September rate move. The hope is

that a rate cut is still on the cards without a sharp

deterioration in the labour market," said Ben Bennett, APAC

investment strategist at Legal and General Investment

Management.

"That could keep investor sentiment very strong. Tonight's

Nvidia ( NVDA ) results will also be important for the near-term

direction of markets."

Data showed options traders are pricing in about a $260

billion swing in Nvidia's ( NVDA ) market value after the firm reports

earnings, where its business in China will be in focus following

an unusual profit-sharing deal with the Trump administration.

Caught in the crossfire of a Sino-U.S. trade war, the fate

of Nvidia's ( NVDA ) China business hangs on where the world's two

largest economies land on tariff talks and chip trade curbs.

That has left traders hesitant in placing major bets. MSCI's

broadest index of Asia-Pacific shares outside Japan

up just 0.2%, Japan's Nikkei was little

changed and share prices in Taiwan were up 0.6%.

China's blue-chip stocks gained 0.3%, hovering

near a three-year high touched earlier in the week. Stocks in

China have been on a tear recently, buoyed by tech sector.

In commodities, spot gold was 0.23% lower after

hitting a two-week high in the previous session.

Oil prices were little changed after falling in the previous

session, as the market awaits massive new U.S. tariffs on

imports from India, the world's third-largest crude consumer, in

response to India's purchases of Russian oil.