Asian markets mostly rose Friday while the yen sat around nine-month highs and gold hit a record after another healthy day on Wall Street as investors gear up for an expected US interest rate cut next week.
More data suggesting the Federal Reserve was winning the battle against inflation provided an extra kick for equities after another rollercoaster week that started with big losses fuelled by US recession worries.
While concern after last Friday's big miss on US jobs creation -- which followed another well-below-forecast read a month ago -- continues to linger, traders are turning their attention to the central bank decision on September 18.
Having slashed rates in the early months of the pandemic, the Fed began hiking in 2022 as inflation started to take hold, and they kept lifting until rates hit a two-decade high.
Now, with disinflation seemingly kicking in and the labour market softening, decision-makers are tipped to start cutting again, with debate on a 25 or 50 basis point move.
Figures on Thursday showed wholesale prices rose 0.2 percent in August, putting the benchmark on an annual basis at 1.7 percent, down from a revised 2.1 percent the previous month.
However, when volatile food and energy components were stripped out, they were up 0.3 percent, topping forecasts.
The readings came a day after news the consumer price index had hit its lowest level since February 2021.
Observers said the data did little to alter the view that borrowing costs would come down but made the case for the bigger move harder.
"With inflation concerns receding and the labour market having rebalanced, the Fed's current stance of monetary policy is too restrictive," said Xiao Cui at Pictet Wealth Management.
"A situation where labour demand is too weak to absorb the temporarily elevated growth in labor supply is a slow-moving issue that the Fed can likely deal with by easing policy."
Confidence that the Fed would cut provided support to Wall Street, and Asia mostly followed suit.
Hong Kong, Sydney, Singapore, Seoul, Wellington, Taipei and Bangkok were in the green, along with London, Paris, and Frankfurt at the open. Shanghai and Mumbai fell, however.
Tokyo was weighed by a stronger yen, which briefly hit the 140.65 per dollar mark last touched at the end of December on bets the Fed will ease monetary policy.
The Japanese unit has rallied strongly since touching almost 162 in July, which caused authorities to spend billions to prop it up.
Expectations the Bank of Japan will hike rates for a third time this year have also boosted the currency, while decision-makers have suggested more to come if the economy and inflation act as forecast.
The BoJ is seen holding rates at its meeting next week but investors are watching deliberations after it announced a surprise lift at its last gathering, sparking market turmoil.
While the yen has enjoyed a healthy run recently, Alvin Tan from RBC Capital Markets told AFP did not see it strengthening much more owing to the still wide difference in rates between the Fed and BoJ.
"The widening Fed-BoJ monetary divergence means that the dollar/yen has peaked for the cycle (at 162), but I also remain unconvinced that it is on a steady downtrend because I don't see sustained risk-off conditions in global markets through year-end.
"I expect (it) to be largely range-bound, between 140 and 150 in coming months."
Gold spiked at a fresh high of $2,570.30 on expectations that the Fed will cut rates next week. Lower US borrowing costs makes gold more attractive as an investment for traders while they also weaken the dollar, making the commodity cheaper.
Tokyo - Nikkei 225: DOWN 0.7 percent at 36,581.76 (close)
Hong Kong - Hang Seng Index: UP 0.8 percent at 17,369.09 (close)
Shanghai - Composite: DOWN 0.5 percent at 2,704.09 (close)
London - FTSE 100: UP 0.2 percent at 8,257.69
Dollar/yen: DOWN at 140.96 yen from 141.78 yen on Thursday
Euro/dollar: UP at $1.1087 from $1.1078
Pound/dollar: UP at $1.3143 from $1.3126
Euro/pound: UP at 84.37 pence from 84.36 pence
West Texas Intermediate: UP 0.5 percent at $69.30 per barrel
Brent North Sea Crude: UP 0.4 percent at $72.24 per barrel
New York - Dow: UP 0.6 percent at 41,096.77 (close)
