Asia tocks set records in Japan, dollar gets Fed boost

Stocks in Japan and South Korea climbed to record highs on Friday as peace in the Middle East with the reopening of the Strait of Hormuz further lowered oil prices and eased inflation fears.

The US dollar lost value, hovering near a 13-month high among major currencies, after the Fed’s hawkish tone led markets to price in multiple interest rate hikes this year. This has dragged the yen to its weakest level in two years and intensified speculation that Japanese authorities may soon have to intervene and halt the currency’s slide.

After the United States lifted the blockade against Iran on Thursday, oil tankers began passing through the Strait of Hormuz and an interim agreement to end the three-month war came into force. Brent crude futures fell 1.0 per cent to US$79.03 ($A112.60) per barrel on Friday and are down 9.5 per cent for the week.

Stock markets had a blockbuster week. Japan’s Nikkei index rose 0.8 percent, breaking a new record for the fifth consecutive session and taking its weekly gain to 8.5 percent. South Korea recorded an increase of 3.1 percent, in addition to its weekly increase of 15.3 percent.

Mainland China and Hong Kong stock markets are closed for the Dragon Boat Festival holiday. He was also on vacation in Taiwan.

Despite market optimism that oil flows through the Strait of Hormuz will resume, analysts have warned that Iran is unlikely to relinquish its control over the strait.

“The future management of the strait will be managed by Iran and Oman, creating scope for Iran to impose a ‘maritime service’ fee,” said Madison Cartwright, senior geoeconomics analyst at Commonwealth Bank of Australia, and noted that free passage is only guaranteed for 60 days.

“It undermines international norms regarding free navigation and sets a precedent that may be followed by others.”

Wall ⁠Street futures contracts fell 0.2 percent after the overnight rally. Intel’s shares rose 10 percent to a record high after US President Donald Trump said that iPhone manufacturer Apple agreed to work with Intel to design and produce its chips in the United States.

The US dollar index will be at 100.78 on Friday, with a weekly increase of 1.0 percent. This pushed the yen to 161.26 per dollar, its lowest level since July 2024 and well above the 160 level seen as the line for Japanese intervention.

The British pound lost 0.1 per cent to US$1.3195 (A1.8799), following a 0.7 per cent drop overnight as the Bank of England left interest rates unchanged in a 7-2 vote. Andy Burnham, the mayor of Greater Manchester, won the election in northern England on Friday, removing a key obstacle to his leadership challenge against Prime Minister Keir Starmer.

The dollar’s strength reflects a sharp repricing in the Fed’s interest rate outlook after nine of 19 officials signaled higher borrowing costs this year after the central bank kept interest rates steady as expected on Wednesday. New Fed Chairman Kevin Warsh has promised to achieve price stability.

This hit short-term Treasuries hard; Two-year U.S. Treasury yields rose 9 basis points this week to 4.1790 percent, but longer-term bonds were helped as investors took relief from a drop in oil prices and the central bank remained indifferent to political pressure to cut interest rates.

Ten-year yields fell three basis points this week to 4.4510 percent, while 30-year yields fell seven basis points to 4.9010 percent, the lowest in nearly two months.

“The curve remains fairly flat from before the meeting, reflecting a combination of higher expected policy rates and stronger confidence in the Fed’s credibility in fighting inflation,” Morgan Stanley strategist Molly Nickolin said.

Cash Treasury bond markets are closed in Asia due to the June 10 holiday in the USA

Precious metals were under pressure due to the strong dollar. Spot gold fell 0.5 per cent to US$4,188 (A$A5,967) per ounce, while spot silver fell 0.8 per cent to US$65.30 (A$A93.03) per ounce.

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