A cameraman films a stock quotation board at the Tokyo Stock Exchange in Tokyo December 15, 2014.
Credit: Reuters/Yuya Shino
European shares .FTEU3 gave back early gains, after stumbling for the first time in nine sessions on Tuesday, and after record profits for Apple (AAPL.O) and a surprise rate cut in Singapore had bolstered Asian markets.
The dollar was starting to slide against the euro EUR=, the yen JPY= and other currencies .DXY, anticipating a statement after the Fed's first meeting of the year ends later on Wednesday.
Scepticism is growing that the Fed will raise rates by mid-year, as had been expected. Other major central banks are easing aggressively and a strong dollar and
slumping oil prices are driving down inflation.
"The question at the top of every market participant’s mind is whether the world’s largest central bank will follow its global counterparts into a more dovish policy lean," said John Kicklighter, Chief Currency Strategist at DailyFX.
Two-year Treasury yields held above 0.51 percent US2YT=RR in European trade, after falling on Tuesday when corporate earnings and durable goods data came in weaker than forecast. Multinationals Microsoft (MSFT.O) and DuPont (DD.N) both complained the strong dollar was hurting their profits.
European government bonds, meanwhile, saw their yields creep up again amid uncertainty over debt-relief negotiations between Greece's new government and the rest of the euro zone. [GVD/EUR]
Greek Prime Minister Alexis Tsipras named a cabinet of anti-austerity veterans and halted privatisation of Greece's biggest port on Tuesday, signalling he aims to stick to election pledges despite warning shots from the euro zone and financial markets.
Greek 5-year yields rose a record high of 13.11 percent in early European trading and 10-year yields GR10YT=TWEB climbed back above 10 percent for the first time in three weeks.
SINGAPORE SLING
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS ticked up 0.2 percent to a four-month high. The Nikkei .N225 also gained 0.2 percent to reach a one-month high.
Singapore's central bank eased monetary policy unexpectedly before its scheduled review in April. It joins a growing list of central banks from Denmark and Canada to Turkey and India that have made similar moves in what is shaping up as a global currency war.
The Singapore dollar fell to its weakest in nearly four-and-a-half years following the cut. Other emerging Asian currencies weakened as well, including Malaysia's ringgit MYR=MY, even though its central bank kept rates on hold at its meeting.
Rising bets that the U.S. Fed will push back a rate hike saw emerging-market shares consolidate their recent gains. Fed funds rates <0#FF:> are now pricing in only a slim chance rates will rise before the end of the year.
"The market now thinks a rate hike around June is unlikely. So if the Fed does not change its tone, the market will take it as a bit more hawkish than expected," said Tomoaki Shishido, fixed income analyst at Nomura Securities.
In commodity markets, oil prices were pressured by news U.S. oil stockpiles surged by nearly 13 million barrels last week. [API/S]
Brent crude oil LCOc1 dipped to $49.01 a barrel and U.S. crude oil futures CLc1 slipped to $45.57. Safe-haven gold XAU= hovered at 1,288 an ounce while copper CMCU3, which has lost 25 percent in the last six months, climbed 1 percent.
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