Asia benefits from Wall Street rise, dollar collapses on US inflation

Asia benefits from Wall Street rise, dollar collapses on US inflation
Asia benefits from Wall Street rise, dollar collapses on US inflation

Asian stock markets rallied on Thursday, supported by Wall Street’s surge to all-time highs overnight, after a softer U.S. inflation report bolstered expectations the Federal Reserve would make at least two rate cuts this year.

The dollar remained on a downtrend, falling to fresh multi-week lows against its peers, including the euro and pound sterling.

U.S. Treasury yields continued their decline in Tokyo trading, falling to fresh six-week lows. That helped the yen continue its recovery, even though data showed Japan’s economy contracted more than expected in the first quarter.

Gold edged closer to record highs and crude oil extended gains after rebounding sharply overnight from a two-month low.

U.S. data on Wednesday showed the consumer price index (CPI) rose 0.3% in April, below the expected 0.4% rise, raising hopes that the Federal Reserve may cut interest rates twice this year.

Fed funds futures forecast 52 basis points of cuts this year, with one in September now fully on schedule.

The data brought palpable relief to markets after higher-than-expected U.S. consumer prices in the first quarter led to a sharp reduction in bets on rate cuts, and even fueled some fears of another hike.

“The expression of relief is spilling over into risk assets, with markets coming alive as soon as we saw US core CPI,” Chris Weston, head of research at Pepperstone, wrote in a report.

“Overall, after three months of troubling price pressures, this is a report that will sit well with (Fed Chairman Jay Powell) and his colleagues.”

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.44%. Hong Kong’s Hang Seng rose 0.9%, while Australia’s stock index rallied 1.5%.

Japan’s Nikkei initially jumped 1.3%, but pared those gains to be up 0.6%, pressured by some disappointing year-end results on the last day of the reporting season , Wednesday, and fears linked to the sharp rise in the yen.

The Japanese currency stood out on Thursday, outpacing gains against the dollar among major peers.

The dollar was down 0.63% at 153.91 yen, after hitting 156.55 in the previous session.

The 10-year U.S. Treasury yield, which the dollar-yen pair tends to track, slipped to 4.705% for the first time since April 5.

The dollar index, which measures the currency against the yen, euro, pound sterling and three other currencies, weakened 0.07% to 104.12, its lowest level for five weeks.

The euro hit $1.08925, its highest level since March 21, and the pound sterling hit $1.2697 for the first time since April 10.

Also benefiting from the general weakness of the dollar, flagship cryptocurrency bitcoin reached a new three-week high at $66,694.89, after rising more than 7% on Wednesday.

“It’s hard to ignore the cryptocurrency movement,” said Pepperstone’s Weston.

“The April 23 high of $67,252 is the short-term target and level to watch,” he added. “A breakout at this level and we will likely see traders continue this move towards $70,000.”

Gold gained 0.39% to $2,395.39, closing in on the all-time high of $2,431.29 reached on April 12.

Brent crude futures rose 42 cents, or 0.5%, to $83.17 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 43 cents, or 0.6%, to 79.06 dollars, adding to Wednesday’s strong increases.

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