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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 and Rocky Swift

LONDON, Sept 17 (Reuters) - World stocks held near

record highs, gold retreated and the dollar won a reprieve,

ahead of a widely anticipated Federal Reserve rate cut later on

Wednesday against a backdrop of concern about the future of

central bank independence.

European shares were higher in early trade, U.S.

stock futures were flat to a touch firmer ,

Japan's blue-chip Nikkei index pulled back from record

highs and the dollar was a touch firmer a day after it took 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 policymaker Lisa

Cook faces efforts by President Donald Trump to oust her.

"A rate cut is fully priced in. There were some questions

around a 50 bps 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. The

dollar was also a touch firmer at around 146.66 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, head

of foreign exchange research at ANZ, said on a podcast. "We've

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

STAYING FIRM

World stocks held near 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.

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.

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 33 cents, or

0.5%, to $68.14 a barrel, while U.S. West Texas Intermediate

crude futures eased a similar amount to $64.20.

Spot gold eased 0.6% to $3,665 per ounce, after the

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

session.