TOKYO - The dollar ceded some of its overnight gains on Wednesday while Asian stocks struggled as traders weighed the odds of a super-sized Federal Reserve interest rate cut later in the day.

The US currency dropped back sharply against the yen, handing back about half of its rally from Tuesday, when unexpectedly robust US retail sales data was taken as weakening the case for aggressive Fed easing.

However, short-term US bond yields ticked slightly higher.

Japan's Nikkei stock average climbed as much as 1.3 percent early on in reaction to overnight weakness in the yen, but pared those gains to just 0.23 percent as of 0526 GMT as the currency rebounded.

Australia's benchmark sagged 0.1 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan slid 0.27 percent.

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 pointed 0.06 percent higher on Wednesday.

US stocks closed nearly unchanged on Tuesday as investors braced for the Federal Reserve interest-rate decision on Wednesday.

Pan-European STOXX 50 futures were weaker though, down 0.19 percent.

"The (US) 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 0.67 percent to 141.365 yen , although that followed a 1.26 percent surge overnight.