*

50-bp Fed cut back on table after FT, WSJ reports

*

Chances of supersized cut rise to 45% from 14%

*

Dollar hits lowest vs yen since Dec. 28

*

Gold at record, Treasuries bounce

By Amanda Cooper and Pete Schroeder

LONDON/WASHINGTON, Sept 13 (Reuters) - U.S. stocks

opened higher on Friday and gold hit a record high after an

overnight upheaval in investor expectations for a supersized

Federal Reserve interest rate cut next week.

Stocks, Treasury prices and commodities all rallied after

traders raised the chances of a half-point cut from the Fed next

week to 41%, from closer to 14% a day ago, before articles in

the Financial Times and Wall Street Journal each called the

decision "a close call".

In early trading, all three major U.S. indexes were higher.

The Dow Jones Industrial Average rose 0.36%, the S&P 500

gained 0.26%, and the Nasdaq Composite climbed

0.16%.

Hopes for a bigger cut were further boosted when influential

former New York Fed President Bill Dudley said at a forum in

Singapore "there's a strong case for 50."

Beyond the scale of Wednesday's anticipated rate cut, the

language coming out of the Fed's policy statement and future

projections will provide even more fodder for market

expectations.

"The decision to cut between 25bp vs 50bp could be closer

than most people anticipate. In our view, the dot plot will be

the most prominent part of the Fed's guidance next week, along

with Chair Powell's post-meeting press conference. Our

expectation for the Fed's forward guidance is for it to lean

broadly dovish," analysts for TD Securities wrote in a note.

The dollar dropped as much as 1.0% to 140.36 yen,

its weakest since Dec. 28. It was last down 0.83% at 140.61.

The yen has also been supported this week by hawkish

comments from Bank of Japan officials, with policy board member

Naoki Tamura saying on Thursday he was "worried that upside

inflation risk was heightening."

The dollar index, which measures the currency against

the yen and five other major rivals, dropped to a one-week

trough at 101.00.

Benchmark 10-year Treasuries rallied, pushing

yields down 2.1 basis points to 3.659%, while rate-sensitive

two-year yields dropped 6.8 bps to 3.5803%.

GOLD AND OIL CONTINUE CLIMB

Global shares rose for a fifth day, up

0.45%.

Gold headed for its strongest weekly gain since

mid-August, up 0.82% to a record high of $2,579.61 an ounce,

driven by dollar weakness and looming rate cuts.

Crude oil continued to climb after surging and was up 0.78%

to $69.51 a barrel early Friday, as producers assessed the

impact on output after Hurricane Francine tore through the Gulf

of Mexico.

(Additional reporting by Kevin Buckland in Tokyo; Editing by

Shri Navaratnam, Kim Coghill, Timothy Heritage, Alex Richardson

and Jonathan Oatis)