Asian shares moved higher on Thursday as expectations for a Federal Reserve interest rate cut strengthened, while the U.S. dollar remained soft. The Japanese yen stayed in focus, with traders watching closely for possible intervention and assessing the chance of a Bank of Japan rate hike before the end of the year.
Market activity was relatively subdued due to a holiday-shortened week, but sentiment in equities stayed positive. Currencies were more muted, as investors appeared to look past the AI-bubble volatility that shook stocks earlier in November.
U.S. markets are closed on Thursday for the Thanksgiving holiday and will operate only a half-day session on Friday.
MSCI’s broad index of Asia-Pacific shares outside Japan rose 0.4%, tracking Wall Street’s gains and positioning the region to break a three-week losing streak. Japan’s Nikkei jumped more than 1%, while European futures hinted at a softer start.
EUROSTOXX 50 futures slipped 0.04%, FTSE futures fell 0.15%, and DAX futures were largely unchanged.
Charu Chanana, chief investment strategist at Saxo, said that renewed expectations of Fed policy easing have eased recent AI-bubble concerns and lifted market sentiment. She added that December could still support a “Santa rally,” with strong seasonality and a potential cut making it difficult for investors to stay bearish.
Sterling strengthened to its highest level in more than four weeks at $1.3269, supported by UK finance minister Rachel Reeves’ latest budget, which eased worries about the country’s long-term fiscal outlook.
Fed Rate-Cut Odds Rise Despite Data Gaps
Although U.S. economic data releases resumed after the record 43-day government shutdown, most reports have been outdated and provided little clarity on current economic conditions.
Investors have instead focused on recent comments from Federal Reserve officials. Remarks from Mary Daly and Christopher Waller this week reinforced expectations for policy easing. According to CME FedWatch, markets now price in an 85% chance of a rate cut next month — up sharply from 30% a week earlier.
George Boubouras of K2 Asset Management noted that signs of labor market weakness may outweigh lingering inflation concerns, making a December rate cut a reasonable possibility. He added that the U.S. 10-year breakeven inflation rate near 2.25% suggests market confidence that long-term inflation expectations remain under control.
The euro climbed to a one-week high at $1.16115. The dollar index stood at 99.431 after a 0.28% decline in the previous session.
In China, the property sector came under renewed pressure. Developer China Vanke asked bondholders to approve a delay in repaying a 2 billion yuan onshore bond. Its bonds fell sharply, dragging the CSI300 real estate index to a one-year low. The broader CSI300 index still managed a 0.5% gain.
Yen Stays on Intervention Watch
The Japanese yen strengthened to 156.12 per dollar, though traders remained alert for potential government intervention after weeks of warnings from Tokyo officials.
Prime Minister Sanae Takaichi dismissed comparisons to a “Truss moment,” rejecting the idea that Japan’s fiscal stance could trigger a loss of market confidence similar to the UK’s turmoil in 2022.
The yen has weakened nearly 10 points against the dollar since early October, as concerns grew about heavy borrowing needs tied to the government’s spending plans and uncertainty around the Bank of Japan’s next policy move.
Sources told Reuters that the BOJ is preparing markets for a possible rate hike as early as next month, potentially signaling a more consistent tightening path to support the currency.
Bitcoin rose back above $90,000, heading for its first weekly gain in four weeks with nearly a 3% rise. Gold slipped 0.4% to $4,146.53 per ounce after climbing 0.8% in the prior session.
