Dollar cedes ground, Asia stocks mixed as Fed looms large
Traders still debating odds of 50 bps or 25 bps Fed cut
Robust U.S. retail sales briefly tipped scale toward 25 bps
Dollar drops vs yen, but 2-year Treasury yields tick up
Most Asian stocks weak, while Nikkei tracks yen gyrations
By Kevin Buckland
TOKYO, Sept 18 (Reuters) -The dollar ceded some of its overnight gains on Wednesday while Asian stocks put in a mixed display as traders weighed the odds of a super-sized Federal Reserve interest rate cut later in the day.
The U.S. currency dropped back sharply against the yen, handing back a third of its rally from Tuesday, when unexpectedly robust U.S. retail sales data was taken as weakening the case for aggressive Fed easing.
The euro also advanced, clawing back almost all of the previous day's decline.
The chances of the Fed kicking off its easing cycle with a super-sized cut of 50 basis points (bps) oscillated in Asia, retreating to 63% early in the day from 67% around the same time on Tuesday, according to LSEG data. However, as of 0137 GMT, the odds were back at 65%.
Japanese shares were alone in posting strong gains in the region, with the Nikkei stock average .N225 climbing 0.72% to erased Tuesday's 1% slide, as the benchmark index continued to be influenced by the dollar-yen exchange rate.
Mainland Chinese blue chips .CSI300 opened flat after coming back online following a holiday-extended weekend, and Taiwan .TWII also returned from a day off to trade 0.35% weaker. Australia's benchmark .AXJO was little changed.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 0.05%.
Hong Kong and South Korea were among major markets closed for holidays.
Wall Street finished nearly unchanged on Tuesday, failing to sustain early momentum that pushed the S&P 500 and Dow to record intraday highs. S&P 500 futures EScv1 pointed 0.08% higher on Wednesday.
"The (U.S.) price action conveys the significant inflection point markets confront," said Kyle Rodda, senior financial market analyst at Capital.com.
"If the Fed nails it at this meeting, the bull market could charge on. If it doesn't, then it could signal a high water mark in this cycle."
The dollar dropped 0.55% to 141.60 yen JPY=EBS, although that followed a 1.26% surge overnight.
The euro EUR=EBS added 0.12% to $1.1128.
The dollar index =USD eased 0.07% to 100.84, after a 0.3% rally on Tuesday.
Short-term Treasury yields US2YT=RR continued to rise though, with that on the two-year note adding another basis point to stand at 3.6028% in Asian time.
Gold XAU= found its feet, rising 0.15% to $2,573.18 per ounce after slipping back from an all-time high in the previous session.
Crude oil was steady after gaining about $1 a barrel on Wednesday amid escalating tensions around the Middle East.
Militant group Hezbollah vowed retaliation against Israel after pagers detonated across Lebanon on Tuesday, killing at least eight people and wounding nearly 3,000 others.
Meanwhile, the UN's Libya mission said factions did not reach a final agreement in talks aimed at resolving the central bank crisis, which has slashed oil output and exports.
U.S. crude futures CLc1 eased 13 cents to $71.06 in the latest session, and Brent crude futures LCOc1 edged down 14 cents to $73.56.
World FX rates YTD http://tmsnrt.rs/2egbfVh
Global asset performance http://tmsnrt.rs/2yaDPgn
Asian stock markets https://tmsnrt.rs/2zpUAr4
Reporting by Kevin Buckland
Editing by Shri Navaratnam
To read Reuters Markets and Finance news, click on https://www.reuters.com/finance/markets For the state of play of Asian stock markets please click on: 0#.INDEXA
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