Asian stocks showed mixed performance on Friday, with the dollar maintaining strength and keeping the yen near five-month lows amid thin year-end trading. Investors are looking ahead to 2025, when the Federal Reserve is expected to slow its interest rate cuts. The Bank of Japan, however, may raise rates soon, with the December meeting’s summary of opinions suggesting a potential hike in January. The yen was steady at 157.80 per dollar, marking a loss of over 10% against the dollar in 2024.
The yen’s weakness stems from a robust dollar and a large interest rate gap, even with the Fed’s rate cuts. Traders are cautious of possible intervention from Tokyo as the yen nears 160. Meanwhile, MSCI’s Asia-Pacific index, excluding Japan, rose 0.16%, and Japan’s Nikkei gained 0.77%, set for a 19% annual increase. China’s CSI300 and Hong Kong’s Hang Seng saw little change.
With only a few trading days left in the year, attention is shifting to 2025, focusing on the Fed’s policy, the incoming Trump administration, and geopolitical risks. Traders are pricing in two Fed rate cuts next year, with the first expected in June.
The Fed’s rate outlook has pushed the 10-year Treasury yield to 4.57%, its highest since May, while the dollar index remains near a two-year high at 108.11. In commodities, gold eased to $2,631 per ounce, still up 28% for the year, while oil prices dipped slightly.
