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Euro hits 4-year high as speculation rife before expected

Fed

rate cut

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Bank of Canada also set to cut rates due to weak labour

market

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Gold reaches new highs as investors seek safe haven

By Rocky Swift

TOKYO, Sept 17 (Reuters) - The dollar was on the

defensive, shares edged lower, and gold scaled new heights on

Wednesday as global markets counted down to an anticipated rate

cut by the Federal Reserve later in the day and waited on

signals around the extent of future easing.

The euro surged to a four-year high against the greenback in

the prior session on the Fed easing bets, while oil remained

firm following Ukrainian drone attacks on Russian refineries and

ports.

The Fed is expected to cut its benchmark interest rate by a

quarter of a percentage point to the 4.00%-4.25% range at the

end of its monetary policy meeting later in the global day. The

main focus beyond the rate decision will be on Chair Jerome

Powell's comments on the outlook for U.S. monetary policy.

"Markets are effectively daring the Fed to over-deliver on

the dovish side," said Dilin Wu, research strategist at

Pepperstone. "The bigger question, though, is whether Powell can

satisfy markets already leaning heavily on a dovish view, or

whether conditions are ripe for a near-term shakeout in both USD

and gold positioning."

The dollar index, which tracks the greenback against

a basket of currencies of other major trading partners, edged up

0.1% to 96.689 after a 0.7% slide on Tuesday to the lowest since

early July.

The European single currency was down 0.1% at

$1.1857, after touching $1.1867 on Tuesday, its highest level

since September 2021. The dollar was little changed at 146.52

yen following a 0.6% slide in the previous session.

"If the (Fed) chair is more dovish than expected, of course,

you would expect that to weigh on the dollar, but really, how

much more bearish can you get from here?" Mahjabeen Zaman, the

head of foreign exchange research at ANZ, said on a podcast.

"We've already got more than five cuts priced in for the cycle."

Stephen Miran was sworn into his Fed position on Tuesday

morning, after the U.S. Senate narrowly confirmed him to the

central bank's Board of Governors ahead of its policy meeting. A

U.S. appeals court separately declined to let President Donald

Trump fire Fed Governor Lisa Cook.

MSCI's broadest index of Asia-Pacific shares outside Japan

was down 0.2%, after Wall Street closed lower.

Japan's Nikkei stock index slid 0.1% after a record

close on Tuesday.

European and U.S. stock futures were firmer after a largely

soft cash session overnight. The pan-region Euro Stoxx 50

futures were up 0.35%, German DAX futures

gained 0.4% and FTSE futures added 0.2%. U.S. stock

futures, the S&P 500 e-minis, crept up 0.1%.

The Bank of Canada is also expected to cut rates on

Wednesday to contend with a flagging labour market and trade

frictions. Soft trade data from Japan showing exports fell for a

fourth straight month in August highlighted the toll on major

economies from the wide-ranging tariffs imposed by the Trump

administration.

U.S. crude dipped 0.05% to $64.49 a barrel after a

three-day surge. Russia's oil pipeline monopoly Transneft has

warned producers they may have to cut output following Ukraine's

drone attacks on critical facilities, three industry sources

said.

Spot gold edged slightly higher to $3,690.32 per

ounce, after the yellow metal crossed $3,700 for the first time

in the previous session.

(Editing by Shri Navaratnam)