Asian Markets Edge Higher as Fed Rate-Cut Expectations Build; Yen Stays in Intervention Spotlight
SINGAPORE, Nov 27 (Foxton News) – Asian equity markets advanced on Thursday, supported by increasing confidence that the U.S. Federal Reserve could move toward its first interest-rate cut as early as next month. At the same time, the Japanese yen remained firmly on traders’ radars as speculation of imminent intervention intensified, amid uncertainty over whether the Bank of Japan (BOJ) might deliver a rate hike before the close of the year.
With much of the global financial system winding down for the U.S. Thanksgiving holiday, market movements were generally subdued. Still, the overall tone across Asian markets was constructive. Stocks broadly held their gains, and major currencies traded in tight ranges as investors brushed aside the earlier volatility tied to fears of an overheating artificial-intelligence sector—concerns that had weighed heavily on equities earlier in November. U.S. markets were shuttered for the day and were scheduled to reopen for a shortened trading session on Friday.
The MSCI Asia-Pacific index excluding Japan ticked up about 0.4%, mirroring the upbeat performance from Wall Street and placing it on track to end a three-week losing streak. Elsewhere, major regional indices posted more pronounced gains: Japan’s Nikkei and South Korea’s Kospi both surged more than 1%, boosted by optimism around U.S. monetary policy and improved sentiment toward technology shares.
Charu Chanana, chief investment strategist at Saxo, noted that global stocks were responding positively to the revival of expectations for a Fed rate cut. According to her, easing policy conditions help temper renewed anxiety about an AI-driven market bubble that had rattled investors earlier in the month.
“Heading into the final stretch of the year, markets may either drift sideways or continue to grind higher,” she explained. “With a potential Fed cut looming and historically strong seasonal patterns in December, it’s a tough environment for bearish bets. The prospect of a Santa-Claus rally remains very much alive.”
Chinese Real Estate Sector Back Under Pressure
The Chinese property market—long a source of financial stress for the region—returned to the forefront of investor attention after troubled developer China Vanke asked bondholders for permission to delay repayment on a 2-billion-yuan (about $282.6 million) onshore bond.
The announcement rattled sentiment toward the sector. Vanke’s bonds plunged when trading began on Thursday, extending the steep losses recorded earlier in the week. Several of its yuan-denominated bonds dropped more than 20%, with some falling close to 40%, underscoring persistent skepticism about the health of China’s real estate developers.
Reflecting the renewed pressure, the CSI300 Real Estate Index slumped to a fresh one-year low, shedding about 1.5%. In contrast, the broader CSI300 Index managed to advance around 0.4%, illustrating the stark divergence between China’s battered property sector and the rest of the market.
Rate-Cut Expectations Surge as Investors Parse Fed Signals
Although the flow of U.S. economic data resumed following the historic 43-day government shutdown that ended in mid-November, most reports released so far have been outdated. Because the data was gathered weeks before it was published, it has provided little insight into the economy’s current momentum. This lack of timely data has forced traders to rely more heavily on public remarks from Federal Reserve officials.
Comments this week from Mary Daly, President of the San Francisco Federal Reserve Bank, and Christopher Waller, a member of the Fed’s Board of Governors, have reinforced the possibility of a rate cut in December. Their remarks were interpreted as signaling openness to easing policy sooner than previously expected, particularly if inflation continues to drift downward and labor markets soften.
According to CME FedWatch, traders now see an 85% probability of a rate cut next month—up sharply from 30% just one week earlier.
George Boubouras, managing director at K2 Asset Management, said that even though inflation has not yet fully settled back to the Fed’s target range, there is enough evidence of weakening labor-market conditions to justify a cautious policy shift.
“Core inflation is still somewhat elevated, but broader indicators—such as the U.S. 10-year breakeven inflation rate hovering around 2.25%—show that markets remain comfortable with where inflation expectations are anchored,” he said. “Given the combination of cooling economic momentum and easing inflation pressures, a December rate cut appears reasonable.”
Data released Wednesday showed U.S. jobless claims unexpectedly falling to a seven-month low, highlighting continued resilience in the labor market and signaling that layoffs remain contained. Despite that, the broader trend suggests a gradual slowing, reinforcing the case for the Fed to consider easing financial conditions.
Dollar Softens as Euro and Sterling Gain Ground
In currency markets, the U.S. dollar slipped modestly, losing momentum as investors reassessed the shifting interest-rate outlook. The euro climbed to its strongest level in more than a week, touching $1.16115, while the U.S. dollar index—which tracks the greenback against a basket of six major peers—edged down to 99.431 after a 0.28% drop in the previous session.
The British pound also strengthened, rising to $1.3247, its highest level in nearly a month. The move came after a budget announcement from UK finance minister Rachel Reeves helped ease lingering concerns about Britain’s long-term fiscal sustainability.
Japanese Yen Stabilizes but Intervention Fears Persist
The Japanese yen steadied slightly around 156.07 per dollar, though it remained near levels that have previously triggered direct intervention from Tokyo. Traders continued to monitor closely for any signs that Japanese authorities might step in to support the currency after weeks of forceful verbal warnings.
Prime Minister Sanae Takaichi attempted to calm investor nerves on Wednesday, insisting Japan was not at risk of experiencing a “Truss-style” crisis—referring to the market turmoil that engulfed the UK in 2022 following an unfunded tax-cut plan. She emphasized that Japan’s fiscal strategy would not lead to the kind of loss in confidence that rattled British markets during the short-lived Liz Truss administration.
Even so, the yen has weakened by almost 10 yen against the dollar since early October, in part due to concerns that Takaichi’s spending agenda will require heavy borrowing. The persistent uncertainty surrounding the timing of the BOJ’s next rate hike has also weighed heavily on the currency.
Sources told Reuters that the BOJ is preparing markets for the possibility of a rate increase as early as next month, as policymakers explore a more consistent tightening path in an effort to reshape the yen’s long-term trajectory. Any such move would mark a significant shift after decades of ultra-loose policy.
Crypto and Commodities: Bitcoin Rebounds, Gold Slips
In digital assets, Bitcoin gained 1.75%, rising to $91,787.55 on Thursday. The cryptocurrency appeared poised to end a four-week losing streak, with nearly 3% accumulated gains for the week. Traders cited lower U.S. yields and a softer dollar as supportive factors for crypto assets.
Meanwhile, gold eased 0.4% to $4,146.53 per ounce, giving back some of the 0.8% advance posted in the prior session. The precious metal remains sensitive to shifts in U.S. rate expectations, with lower interest-rate forecasts generally enhancing gold’s appeal as a non-yielding asset.
Outlook: Markets Cautious but Encouraged Heading Into December
As global markets transition into the final month of the year, the prevailing mood is cautiously optimistic. The combination of expectations for a Fed rate cut, the tailwind of strong year-end seasonality, and relative calm across equity and currency markets suggests that risk assets may continue to find support.
However, several uncertainties remain: the fragile state of China’s property sector, the unpredictable path of Japan’s monetary policy, and lingering concerns about valuation pressures in AI-linked stocks. Any unexpected shift in these areas could easily disrupt the steady tone currently underpinning the markets.
For now, investors appear content to adopt a wait-and-see approach as the holiday season approaches. With lighter trading volumes and fewer major economic releases expected in the coming days, the market’s next significant moves will likely hinge on whether the Fed confirms—or distances itself from—the rising anticipation of a December rate cut.
