SINGAPORE (Reuters) – Asian markets showed a lackluster performance on Friday, with stocks fluctuating in thin year-end trading while the U.S. dollar held steady. The yen remained near five-month lows, as markets anticipated a cautious Federal Reserve in 2025, even as the Bank of Japan (BOJ) hinted at potential near-term rate hikes.
The BOJ, which maintained its monetary policy during its December meeting, released a summary of opinions on Friday that kept the possibility of a rate hike in January alive. This has left the yen hovering at 157.80 per dollar, its weakest levels since July. The yen’s yearly decline against the dollar is now over 10%, marking its fourth consecutive year of losses amid a strong dollar and the persistence of wide interest rate differentials.
Despite the Federal Reserve’s gradual rate cuts, the yen’s struggles have raised concerns about potential intervention from Tokyo, particularly as the currency nears the psychologically significant 160 per dollar threshold.
In equity markets, the MSCI Asia-Pacific index (excluding Japan) edged up slightly to 574.88, posting a solid annual gain of nearly 9%. Japan’s Nikkei index climbed 0.77%, supported by the weak yen, and is on track for an impressive 19% rise this year. Meanwhile, China’s CSI300 Index was mostly flat in early trading, while Hong Kong’s Hang Seng Index ticked up by 0.12% after reopening post-holiday.
“There’s a lull in the markets now, and barring any major surprises, investors seem focused on 2025,” said Kyle Rodda, senior financial market analyst at Capital.com.
Investor sentiment has shifted toward the coming year, with attention centered on the Federal Reserve’s monetary policy, the incoming U.S. administration’s trade agenda, and global geopolitical developments.
The Fed’s recent decision to cut rates by 25 basis points while signaling only two rate cuts for 2025—down from the four projected in September—has shaped expectations. Markets are pricing in 37 basis points of rate easing for next year, with the first cut anticipated in June.
“Should the market settle around the notion of two Fed cuts next year, supported by balanced economic data once trading conditions normalize, the ongoing bull market could find renewed momentum,” Rodda added.
Shifting U.S. rate expectations have pushed the 10-year Treasury yield to 4.57%, its highest level since early May. The dollar index, which measures the greenback against six major peers, stood at 108.11, close to its two-year peak reached last week.
In commodities, gold prices softened to $2,631.34 per ounce but are set to finish the year with a remarkable 28% gain—their strongest annual performance since 2011.
Oil prices slipped in early trading, with Brent crude futures and U.S. West Texas Intermediate crude both down 0.1%.
As the year-end nears, subdued trading conditions signal that market participants are bracing for key policy developments and economic trends expected to shape 2025.
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