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Dollar wins respite before expected Fed rate cut

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Canada also set to cut rates due to weak labour market

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Indonesia delivers surprise rate cut

By Dhara Ranasinghe

LONDON, Sept 17 (Reuters) - World stocks held just below

recent record highs, gold retreated and the dollar won a

reprieve, ahead of a widely anticipated Federal Reserve rate cut

later on Wednesday taking place against a backdrop of concern

about the future of Fed independence.

European shares ceded early gains, U.S. stock

futures dipped , Japan's blue-chip Nikkei index

pulled back from record highs and the dollar rallied a

day after taking a beating on Fed easing bets.

The Fed is expected to cut interest rates by a quarter of a

percentage point to the 4.00%-4.25% range later on Wednesday,

with the focus on any comments from Fed Chair Jerome Powell on

the outlook for monetary policy.

The September meeting also takes place under unusual

circumstances - Steven Miran, on leave from the Trump

administration, has joined the Fed board while Fed governor Lisa

Cook has so far fought off efforts by President Donald Trump to

oust her.

"A (25 bp) rate cut is fully priced in. There were some

questions around a 50 bp cut given the doves on the board but I

think that's less likely," said Nina Stanojevic, senior

investment specialist at St. James's Place.

"What will be interesting is the narrative that comes out of

the meeting and where the trajectory of rates is going to be."

The dollar index, which tracks the dollar against a

basket of currencies of other major trading partners, edged up

0.2% after falling on Tuesday to the lowest since early July.

The euro slipped 0.25% to $1.1840, after touching

$1.1867 on Tuesday, its highest level since September 2021. But

the dollar was a touch softer at around 146.33 yen following a

0.6% slide in the previous session.

"A dovish shift in the Fed's stance would lead to more

monetary policy easing in 2026 than may be warranted", ABN AMRO

analysts said in a note. "This could also partly explain the

extent of rate cuts currently priced in by market."

Money markets price in almost 70 bps of Fed easing by

year-end.

STAYING FIRM

World stocks held just below Monday's record highs

, while in Asia Hong Kong's benchmark Hang Seng

Index jumped 1.8%, buoyed by signs of progress of a deal

to allow the Chinese-owned social media platform TikTok to keep

operating in the U.S.

News that Japan's 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.

The Bank of Canada is also expected to cut rates on Wednesday to

contend with a flagging labour market and trade frictions.

In Europe, data showing UK inflation holding at 3.8% in August

reinforced expectations for no rate change at Thursday's Bank of

England meeting.

Sterling was a touch softer around $1.3637.

Elsewhere, Indonesia's central bank delivered another surprise

interest rate cut, its sixth cut since it kicked off an easing

cycle in September last year, saying economic growth needed to

be strengthened.

Indonesian markets have been unsettled by two weeks of

protests and unrest across many cities from late August and then

last week's abrupt sacking of respected finance minister Sri

Mulyani Indrawati.

Oil prices eased, after rising more than 1% in the previous

session, though geopolitical concerns provided a floor for the

market.

Brent crude futures were last down 0.8%, to $67.89 a

barrel, while U.S. West Texas Intermediate crude futures

eased a similar amount to $64.

Spot gold eased 0.75% to $3,665 per ounce, after the

yellow metal crossed $3,700 for the first time in the previous

session.