SINGAPORE: Asian stocks rose on Thursday and the dollar was soft on growing expectations of an interest rate cut from the Federal Reserve next month, while the yen stayed in the spotlight, with traders weighing the prospect of a rate hike before the end of the year.
A holiday-curtailed week has led to limited moves across markets with stocks keeping a largely upbeat tone and currencies much more sedate. The US markets are closed for the Thanksgiving holiday on Thursday and are due to trade for a short session on Friday.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.27% higher, tracking gains from Wall Street and on course to snap a three-week losing streak. Japan’s Nikkei and South Korea’s Kospi surged over 1%.
Investor focus will also be on the Chinese property sector as property developer China Vanke seeks bondholder approval to delay the repayment of a 2 billion yuan (US$282.6 million) onshore bond.
A public bond extension would be the first for the state-backed property developer, a household name with many projects in China’s biggest cities and could trigger a new wave of anxiety in both financial and property markets.
Surging rate cut wagers
While the US data flow has resumed since the record 43-day government shutdown ended mid-November, most of the economic reports issued so far have been significantly dated and have offered very little insight into the health of the economy.
That has turned investors’ attention squarely on comments from Fed officials to gauge the US monetary policy path, with comments this week from San Francisco Federal Reserve Bank President Mary Daly and Fed Governor Christopher Waller boosting expectations of a rate cut.
Traders are now pricing in an 85% chance of a rate cut next month compared with just 30% a week earlier, CME FedWatch showed.
George Boubouras, managing director of K2 Asset Management, said there is enough on the labour market weakness to offset the current inflation pulse, with a December rate cut on balance looking reasonable.
“While core inflation is above target, the US 10-year breakeven inflation rate around 2.25% suggests that markets are broadly comfortable inflation expectations remain reasonable. In the short-term USD weakness to persist but to be reversed in the March quarter 2026.”
The euro rose to the highest in more than a week at 1.16045 in early trading. The dollar index, which measures the US currency against six rivals, was little changed at 99.523, after dropping 0.28% on the previous day.
Data on Wednesday showed the number of Americans filing new applications for unemployment benefits fell to a seven-month low last week, suggesting layoffs remained low.
Sterling rose to US$1.3247, a one-month high after UK finance minister Rachel Reeves’ budget helped alleviate some concern about Britain’s long-term finances.
Yen watch
The Japanese yen strengthened a bit to 156.16 per dollar as investors kept an eye on possible intervention from Tokyo after weeks of verbal jawboning from authorities to stem the currency’s relentless slide.
Prime Minister Sanae Takaichi ruled out on Wednesday the possibility that Japan could face a British-style “Truss moment”, or loss of market confidence stemming from her expansionary fiscal policy.
The Japanese currency has weakened by nearly 10 yen since the start of October as Takaichi took over the helm amid worries the administration’s spending plans will need heavy borrowing, and on doubts over the timing of the next rate hike from the Bank of Japan.
Sources told Reuters that the BOJ is preparing markets for a possible rate hike as soon as next month as it may take a more consistent rate hike path to alter the trajectory of the currency.
Bitcoin was back above US$90,000 on Thursday, on track to snap a four-week losing streak with a nearly 3% gain. Gold was flat at US$4,164.81 per ounce, after rising 0.8% in the previous session.
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