Ankur Banerjee
SINGAPORE (Reuters) – Asian shares rose on Friday as the dollar was firm, holding the yen near five-month lows in weak year-end trading as investors look ahead to 2025, when the Federal Reserve is expected to take a cautious approach to rating cuts.
The Bank of Japan, on the other hand, could raise rates in the short term, with a summary of the bank’s December meeting published on Friday keeping alive the possibility of a January hike. The BOJ decided to stay at its meeting in December.
As a result, the yen has been hovering around levels last seen in July. It was slightly stronger on Friday at 157.59 to the dollar, still down more than 10% in 2024 against the greenback, its fourth straight year of decline.
The currency has been under pressure from a strong dollar and a wide interest rate gap that persists despite the Fed’s rate cuts, with traders wary of another intervention from Tokyo as the yen nears the 160 level.
“The Japanese government is alarmed by developments in exchange rates, including those driven by speculators, and will take appropriate measures against excessive movements,” Japanese Finance Minister Katsunobu Kato said on Friday, repeating his warning that measures should be taken against excessive currency movements.
In equities, MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.1% higher at 575.11, on track for a nearly 9% gain this year. up 2% due to weak yen, forecast to grow around 21% in 2024
China’s blue-chip index was higher by 0.1%, while Hong Kong’s rose by 0.3% after the holiday on Thursday.
“There’s clearly a lull right now, and barring an extreme surprise, the markets probably won’t lack direction,” said Kyle Rodda, senior financial markets analyst at Capital.com.
European markets are likely to open higher, with Eurostoxx 50 futures up 0.5%, German futures up 0.3% and up 0.08%.
With only a few trading days left in the year, investors’ focus has shifted to 2025, with the Fed’s policy direction, the incoming Trump administration and its policies related to tariffs and geopolitical concerns taking center stage.
The Fed jolted markets earlier this month by cutting rates by 25 basis points, but forecast just two rate cuts next year, down from the four it projected in September. Traders are predicting a 37 basis point easing next year, with the next cut fully due in June.
“Simply put, if the markets can get comfortable with the idea of two more cuts from the Fed, and that is later backed up by Goldilocks data after trading conditions normalize, then the bull market can have more legs,” Rodda said.
Fluctuating expectations about US rates led to the highest level since early May. The last time it was 4.57 percent on Friday.
The index , which measures the U.S. unit against six other major comparable indexes, stood at 108.11, not far from the two-year record it hit last week. The index increased by 6.6 percent this year.
On the commodities side, gold prices were unchanged at $2,633 an ounce, which is forecast to rise about 28% for the year, their strongest annual performance since 2011. [GOL/]
Oil prices were little changed but were set to rise weekly as investors await economic stimulus efforts in China, the world’s largest oil importer. futures prices and US West Texas Intermediate crude were unchanged on Friday. [O/R]
