The dollar faced pressure on Friday following its largest decline in a month against major currencies, coinciding with a retreat in U.S. yields from nearly three-month highs. This shift was prompted by falling Treasury prices that attracted buyers.
Asian stock markets displayed mixed performance, with some regions benefiting from Wall Street’s overnight gains. Japan’s Nikkei index struggled, as the yen rebounded strongly from a three-week low against the dollar. Meanwhile, Hong Kong’s Hang Seng index saw an increase, while mainland blue-chip stocks remained flat.
Despite the day’s movements, the dollar is on track for its fourth consecutive weekly rise, and the 10-year Treasury yield is poised for a sixth weekly increase. This trend has been driven by a series of robust U.S. economic indicators, signaling that the Federal Reserve may adopt a cautious approach to interest rate cuts. The surge in bond yields has unsettled stock investors, contributing to a projected 1.2% decline in the MSCI world equities index for the week.
Crude oil is also set for a weekly gain amid ongoing output risks stemming from tensions in the Middle East. Meanwhile, safe-haven gold is on track for a third consecutive week of gains.
As of 0154 GMT, the Nikkei had declined by 1%, while the Hang Seng rose by 0.5%. Taiwan’s benchmark index also saw a modest increase of 0.5%. In Japan, an upcoming election on Sunday may result in the ruling coalition losing its parliamentary majority, introducing potential political instability that could further weigh on the stock market.
Next week is poised to be eventful, beginning with the monthly U.S. payrolls report due on Friday. The U.S. presidential election will follow on November 5, accompanied by a Federal Reserve policy decision two days later. Earnings reports from major tech companies such as Alphabet, Amazon, Apple, Meta, and Microsoft are also expected.
Kyle Rodda, a senior financial market analyst at Capital.com, noted, “There remains a degree of caution in the markets, with mixed equity performance attributed to a combination of macroeconomic, earnings, and political risks looming on the horizon.” However, he added, “the narrative was a positive one overnight, opening up opportunities for some risk-taking.”
Recent data revealed an unexpected drop in new applications for U.S. unemployment benefits, while a significantly stronger-than-anticipated payroll report for September has led to a reassessment of the Fed’s rate-cutting trajectory this month.
On Friday, the 10-year Treasury yield dipped to 4.1918%, following a four-basis-point decline in the previous session, after reaching a three-month peak of 4.26% on Wednesday. The dollar index, which gauges the currency against six major peers, remained relatively unchanged at 104.06, down from a three-month high of 104.57 on Wednesday, yet it has gained 0.56% over the week.
The dollar was stable at 151.835 yen, while the euro edged down 0.04% to $1.082325. Speculation regarding a potential Donald Trump victory in some betting markets has recently bolstered U.S. yields and the dollar, given the Republican candidate’s inflationary tax and tariff policies.
Gold prices eased slightly on Friday to $2,729 per ounce but are still on track for a 0.22% weekly increase. Brent crude futures rose by 0.6% to $74.83 a barrel, while U.S. West Texas Intermediate crude gained 0.6% to $70.62 a barrel.
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